Monday, March 26, 2007

Western Union money transfer to dominate Posta Pay




When Posta Pay was launched last year as a cheap fast money transfer service of the Postal Corporation of Kenya, few people thought that Western Union money transfer would hold out, especially for money transfers within the borders of Kenya.

Months after the launch of the service, it seems that Western Union has managed to hold its own pretty well.

Wishing to establish the reasons for this, I went to GPO last Saturday, the head quarters of Posta Kenya in Nairobi, to send some money to a friend in the coast region.

There were only two counters, and there was a long queue of people waiting to send or receive money.

In spite of notices indicating that one counter was for sending and another for receiving, this procedure was not followed, all persons queued on one line, and went to each counter as and when it became available.

The customers were furious. It took an average of 45 minutes for me to get to the counter. The counters were moving far too slowly.

A manager was hovering behind the counters, not listening to customer complaints.

If this was a private institution, the manager would probably have knucked down to open a fresh counter, and serve more customers, in order that Posta makes more money from commissions...alas, this never seems to feature in the minds of most Government or quasi-Government institutions..and Posta is a glaring example of that.

To add insult to injury, the watchman from a non-familiar security company, kept hovering and glaring at the customers, exchanging rude insults with them, refusing to call a manager to address the customers saying that was not his job, even threating to physically square it outside after hours with a particularly infuriated customer.... this was particularly disastrous on the calibre of security personnel hired by Posta.

There was no TV, no water to drink, no seats to rest nearby...a terrible experience.

The Post office was then closed at 12noon or thereabouts.

I decided to go for an early lunch until 2pm when i sauntered over to Western Union at Nation Building.

There were 3 counters, all open (they are even open on Sunday), there was no queue (there were comfortable seats and mineral water to quench your thirst while watching TV or reading the provided newspaper).

The watchman from a well known security company was very discplined, sat well away from the customers, the attendants at the counters were very friendly indeed, and the transaction was concluded expeditiously.

It is therefore no surprise that I (and many customers) shall always go to Western Union money transfer in spite of their slightly higher charges....Posta Pay has left a very bitter taste in my mouth !

Thursday, March 22, 2007

The Massive Risks & Gaping Loopholes that are driving investors off the Nairobi Stock Exchange



On February 19, 2007, Edward Ntalami, Chief Executive Capital Markets Authority (CMA) issued a notice that Francis Thuo and Partners have been barred from accessing the trading floor of the Nairobi Stock Exchange for 14 days to enable it address certain financial, operational and non compliance issues. The statement went further to state that the firm was directed to temporarily halt further trading and dealing, address the non compliance issues and deal with pending obligations to its clients.

The firm has since been placed by the CMA under management under the Nairobi Stock Exchange.

It is estimated that a sum of KES 140 million has gone down with this broker.

Investors, who initially thought they were covered to the full extent of their investment, were shocked to hear Mr. Ntalami say that each of them could only expect a maximum sum of KES 50,000/= compensation from the Capital Markets Authority.

The loop holes now existing in the electronic trading system of the Nairobi Stock exchange are simply mind boggling and permitted Francis Thuo (and perhaps others) to:

i) give
the brokers free access to their clients’ investments, unlike in the past where share certificates, a crucial document that was required for any transaction, was held by the investor and would only be surrendered when the investor wanted to liquidate his stocks.

ii)
allow dealers to sell the shares when they hit a certain peak without the shareholders’ consent, only to replace them when the prices dip, making a killing in the process.

Mr Daniel Mwaniki is reported to be one such victim of exploitation by the unethical brokers.

After being a client for over 22 years at the now ailing stock brokerage firm, Francis Thuo and Partners Ltd, Mwaniki was shocked when he noticed that his broker, without his consent, had sold his 4,000 National Bank of Kenya shares valued at over Sh200,000 in January this year.

Upon making an enquiry, one of the firm’s directors, Mr Peter Thuo, hastily credited Mwaniki’s account with 3,000 NBK shares and bought him an additional 1,000 shares at a cost of Sh40,000.

A short text message from the director to Mr Mwaniki reads thus: "We have put back in your account 4,000 NBK shares as agreed. Thank you. Peter Thuo."

Regulator inaction

It is very disturbing to note that the
legal custodian of shareholders’ investments and the market regulators — the state owned Capital Markets Authority (CMA) through the Central Depository and Settlement system, has all along been aware of the current loop holes and actual exploitation of the system.

In October last year, the CEO of the Central Depository System is alleged to have been quoted in a local daily as saying that it is "technically possible" for a stock broker to initiate a transaction without consent, and warned that shareholders should question any suspicious transactions reflected in their statements.

Lack of verification requirements

Prior to the commencement of the Automatic Trading System at the NSE, a written authorisation and a share certificate from the shareholder was required for any dealing in an investors’ shares to be commenced by a broker.

This requirement appears to have been ignored by stock brokers. Indeed, No verification by the shareholder is required before a share transfer is effected.

Present customary practice is that brokers from the different stock brokerage houses post orders from their clients into the system, which then automatically matches them without any requirement for authorisation by the shareholder.

Mr Wellington Mutuku Mbondo is reported to be another victim of the stock brokers.

His four thousand five hundred shares (4,500) of Kenya Power and Lighting Company (KPLC) were sold in January without his consent. He discovered that they had been sold when he got his statement from the CDSC weeks later.

With each KPLC share trading at Sh278 at close of the market on Friday, last week, Mr Mbondo is facing a possible loss of Sh1.25 million. To add to his misery, Francis Thuo were his stock brokers.

Widespread

Similar stories have been reported involving a number of other stock broking firms.

Lack of transparency and action by the CMA

It has been reported that many investors with complaints have been unable to obtain any sort of action from the CMA.

Francis Thuo has been having financial problems for quite a while, but the CMA has conveniently failed, refused and/or ignored to take action to prevent members of the public from pouring their money into the Francis Thuo bottomless pit.

Reported Irregularities on the trading floor

During Eveready IPO’s first day of trading at the stock market, a ‘hitch’ in the system was said to have restricted the share price movement to a rate above 10 per cent. Under normal circumtances the first day of trading of an IPO, the share price can fluctuate by margins of more than 10 per cent of the initial price.

The CMA opted to leave it to Nairobi Stock Exchange to issue a public statement. This was the situation again when news of the CFC/Stanbic banks merger talks that saw the bank’s share price soar to Sh900, which was later attributed by the NSE to be a 'mistake'.

UCHUMI remains suspended from the Nairobi Stock Exchange and the CMA has not given any indication as to when, if ever, investors may redeem the values of their shares in the company.

The above are serious anomalies....which need redress. Not only do investors have to deal with fluctuation of share prices, they also have to contend with insufficient regulatory laws and a slow moving and non-anticipatory Capital Markets Authority.

Is it any surprise that stocks at the Nairobi Stock Exchange are now falling on a daily basis, in spite good earnings reported by the companies?

The risk is yours.

Monday, March 19, 2007

Michuki's shoot to kill Order and the Right to Life


Last week's endorsement by Internal Security Minister John Michuki of his officers to gun down any suspect caught with a gun is a gross contravention of thepolice Constitutional right to life, let alone the right to be taken through the due process of law.

Mr. Michuki may be a frustrated man as violent crime surges in this country, but his orders shall not solve the problem.

Indeed it has been touted that many innocent lives shall be lost through unnecessary deaths at the hands of police officers. It is not inconceivable for innoncent persons to have firearms (even toy pistols) planted on them to justify their death.

It is high time that this country puts in place a body akin to the UK's Indepenent Police Complaints Commission.

Such a body would indendently investigate all complaints from the public against individual police officers, and take necessary action against including commencing criminal proceedings against them.

In the meantime, the following skeleton pointers may assist Hon. John Michuki to deal more effectively with crime:

1. There is need to set out the nature of the problem and current trends
2. develop a comprehensive strategy
3. develop a comprehensive violent crime reduction strategy
4 develop a strategy to intercept sources of illegal arms
5. develop a constitutionally acceptable strategy to deter illegal gun possession and carrying
6. implement education intiatives

The above strategies must also include a comprehensive review of the competence, remuneration and recruitment systems of the police force.

Wednesday, March 14, 2007

Criminal prosecutions wrong jurisprudence for civil cases


Yesterday, the Court of appeal barred the subordinate courts from continuing with the criminal prosecution of former Kenyatta National Hospital (KNH) director, Mr Hosea Waweru, and then chief legal officer, Mr Jorum Mwenda Guantai, on the basis that ..." it is wrong jurisprudence to attempt to rescind lawfully executed contracts by criminally prosecuting the officials of a State Corporation, who are deemed to have breached the regulations."

As one wise judge has previously noted, every civil action can be criminally prosecuted..and hence criminal prosecutions should be commenced in clear cases.

What a relief...that our Court of Appeal is still on top of legal jurisprudence in this country.




Monday, March 12, 2007

Mortgages are nothing but trouble


It was interesting to read an article in the East African Standard entitled "Escape door from a troubled mortgage"

The article gave a few suggestions on how to help yourself escape the mortgage repayment trap.

In my view, it was simply to prolong the inevitable.

Mortgages are legal instruments pursuant to which you give your financier the right to sell off your house, upon default.

Financiers are in the financing business with a view to making money. I have seen many times how merciless they can be, notwithstanding even the death of the person who has taken out eth mortgage, let along unexpected job losses.

The propert shall be sold if you default.

Perhaps your possible saving grace is that you find yourself a good lawyer, who knows how to dig holes in the financier's documentation, in order to secure you a lifeline.

Having said that, the in duplum rule, is just about to kick in, and will ensure that the interest on defaulting loans, does not exceed twice the principle amount lent....which is a good thing!


Thursday, March 01, 2007

Murder of a suspect or not



Last week, Simon Matheri Ikere met his maker after he was shot by police at his home.

He was buried yesterday.

The Kenya National Commission on Human Rights Chairman Maina Kiaia, wrote an article in the dailies, alleging that the circumstances under which Matheri died, were suspicious.

He alleged that Matheri had been questioned for 30 minutes before he was shot.

Question: Was this murder?

The jury is out on this one.

What is clear, however, is that dead men tell no tales!

Maina, as he rightly put it, is unlikely to receive much support in his allegations, whatever may have actually happened.

Deadly violent crime has reached intolerable levels in this country, and most of the public will look at Matheri's death with approval.

Another question: What will be achieved by charging Matheri's wife with the offence of harbouring a criminal?