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British investors holding significant stakes in Nairobi bourse-listed companies have earned a total of Sh19.2 billion (£133.7 million) in dividends and fees for the fiscal year 2013, highlighting the former colonial master’s grip on the Kenyan economy.
London-based multinationals and private equity firms have raked in super earnings given that they own sizeable shareholding in the Kenyan companies which increased dividend payouts following double-digit profit growth.
The UK companies with substantial interest at the Nairobi Securities Exchange, including Vodafone, Standard Chartered, Barclays, Diageo and BAT, have shipped out the billions of shillings to their London headquarters.
The total take-home for the UK businessmen represents more than half or 55.1 per cent of the entire Sh34.8 billion paid as dividends by the 15 NSE-listed firms with considerable British interest, according to research by the Business Daily.
The bountiful harvest for British investors comes in the wake of London’s perceived diplomatic differences with Kenya over the International Criminal Court (ICC) cases facing President Uhuru Kenyatta and his deputy William Ruto.
In the run-up to the March 2013 election, a number of Western countries, including Britain, warned they would only have ‘essential contacts’ with Mr Kenyatta if he were elected President.
Prof Macharia Munene, a history and international relations lecturer at United States International University (USIU, said that Britain’s business interest in Kenya supersedes political differences and that that explains why the multinationals are still having unlimited contact with Nairobi.
“Kenya is of great strategic importance to UK investors. The relationship is symbiotic — Nairobi offers protection to British firms and the companies set up operations here,” said Prof Munene.
Vodafone Group raked in a total of Sh7.3 billion in dividends and M-Pesa royalty fees from listed telecommunications firm Safaricom in the year to March 2013, topping the list of London-based conglomerates that have been minting multi-million pounds from Kenya.
The British multinational telecommunications company is the largest shareholder at Safaricom with a 40 per cent stake.
It earned Sh4.9 billion in dividends after Safaricom’s payout was increased to Sh0.31 per share from Sh0.22 a piece in 2012.
Vodafone Sales and Services Ltd (VSSL) owns proprietary rights to the M-Pesa platform and earns royalties accrued from the use of the mobile money transfer solution.
The fee is calculated at the rate of 11 per cent of total M-Pesa revenue, making the mobile innovation a cash cow for Vodafone Plc. Vodafone pocketed Sh2.4 billion from the Sh21.8 billion revenue that Safaricom generated from M-Pesa in the year to March 2013.
In total, Vodafone has earned Sh6.7 in royalties since the launch of M-Pesa in March 2007, and the money transfer service has recorded double-digit growth in revenue due to increased uptake of the service.
M-Pesa currently has 18.2 million users backed by an agent network of 78,856 outlets across Kenya.
The dividend windfall season will also earn Standard Chartered Plc Sh3.3 billion from the Kenyan unit, up from the Sh2.8 billion it made in 2012.
The London-based bank owns 73.89 per cent of StanChart Kenya and is a beneficiary of the lender’s increased dividend payout of Sh14.50 per share in the year to December 2013 from Sh12.50 a year earlier.
Barclays Bank Plc will rake in Sh2.6 billion for the year ended December 2013 from its Kenyan subsidiary.
The London Stock Exchange-listed lender is the majority owner of Barclays Bank of Kenya with a 68.5 per cent stake.
Barclays Plc saw its dividend earnings from Nairobi drop by a third from Sh3.7 billion in 2012 after the Kenyan unit recorded a dip in net profit.
Barclays Kenya cut dividend payout by a third to Sh0.70 last year from Sh1.00 in 2012 after the lender announced a 12.7 per cent drop in full-year profit, weakened by high costs and a one-off staff restructuring cost of Sh788 million.
British American Tobacco Plc earned Sh2.2 billion in dividends from BAT Kenya where the multinational has a 60 per cent stake.
BAT Kenya’s policy of paying out 100 per cent of earnings as dividends has been a boon to the LSE-listed cigarette maker which earned Sh1.9 billion in 2012.
The tobacco firm paid Sh37 per share dividend for the year ended December 2013, which translates to a payout of Sh3.7 billion — equivalent to total net profit — going by the company’s total issued shares of 100 million.
London-headquartered spirits company Diageo is toasting to the performance of East African Breweries Limited where it has earned Sh2.1 billion in dividends for the year ended June 2013.
Diageo, the world’s largest producer of spirits, has a 50.03 per cent stake in EABL and had gulped Sh3.4 billion in earnings from the Kenyan subsidiary in 2012.
The Kenyan brewer cut its dividend pay to Sh5.50 per share last year from the Sh8.75 paid out in 2012 after net profit plunged 37.9 per cent, blamed on high financing costs.
The British brewer owns brands such as Johnnie Walker, Smirnoff, Captain Morgan, Baileys and Guinness, which are manufactured and distributed in Kenya through EABL.
London-based private equity firm Helios EB Investors with a 24.45 stake in Equity Bank will reap the sixth-largest dividend haul from Kenya’s stock market.
Helios’ take-home from Equity Bank is Sh1.3 billion for the year ended December 2013 after the lender raised its pay-out by a fifth to Sh1.50.
The UK-based PE fund in 2007 invested Sh11 billion to acquire a 24.99 stake in Equity Bank and became the largest shareholder in Kenya’s second-most profitable bank.
Helios has earned a total of Sh4.7 billion in dividends since 2008, underlining the attractive returns for foreign PE firms seeking a piece of growth markets like Kenya.
The stake is now worth Sh28.7 billion, effectively meaning Helios’ investment has grown nearly three-fold in the last six years.
Analysts reckon that the UK’s dominance of profit repatriation from local public companies has more than compensated the former colonial master for loss of government contracts and big-ticket infrastructure deals in the past 10 years.
Firms from China, Japan and South Korea have in the recent past won major tenders for construction of highways, railways, berths at the port, airports and electricity transmission lines as well as power plants.
British investors have significant interest in five out of the seven agricultural companies listed on the NSE, continuing the colonial trend where UK firms owned large tracts of tea and coffee estates.
Williamson Tea, Kapchorua Tea, Kakuzi, Limuru Tea and Rea Vipingo have British interests which saw their owners reap millions of shillings in dividends last year.
The Williamson family of Britain has a 51.46 per cent majority stake at Williamson Tea and a further 23.96 per cent shareholding in Kapchorua Tea through their investment vehicle Ngong Tea Holdings.
The British family earned Sh40.7 million in dividends after both Williamson Tea and Kapchorua Tea declared a Sh7.50 dividend per share last year.
The investment is significant considering that Williamson Tea owns 5,274 acres of tea estate in the Rift Valley while Kapchorua holds about 1,656 acres — valued at billions of shillings at current market prices.
Kakuzi is majority-owned by Camellia plc of England through Bordure Ltd, and Lintak Investments, who hold a combined majority of 50.7 per cent of issued shares.
Camellia Plc raked in Sh37.2 million after Kakuzi kept its dividend pay at Sh3.75 per share for the year to December 2013 despite a massive drop in earnings.
Limuru Tea is owned 52 per cent by Unilever Tea and the British multinational earned Sh4.6 million after the firm declared a dividend payout of Sh7.50 per share.
The company engages in the cultivation of tea, growing, packing and selling of avocados, livestock farming, growing and selling of pineapples, forestry and macadamia development.
Surrey-based BOC Holdings has earned Sh66.3 million from its 65.38 per cent stake at BOC Kenya, maker of industrial gases, following a Sh5.20 per share dividend payout announced last week.
London-based media agency WPP earned Sh57.4 million from its 31.3 per cent stake in Scangroup in the year to December 2012.
The company last year increased its stake in Scangroup to 50.1 per cent in a cash and share swap transaction that was valued at Sh8.21 billion – potentially setting WPP up for a bigger dividend in the year to December 2013 which are yet to be announced.
– Business Daily