Outlook: Where the money will be in 2014

By Standard Team

1. Transport: Bringing order where there is chaos

The two main headaches on Kenyan roads are traffic accidents and chaotic public transport. However, some headway has been made in sorting out the latter. The introduction of a cashless payment method, which officially kicks off in July, has attracted the likes of Equity Bank, Google and Safaricom.

Without a doubt, many more programmers and corporates will flock into this sector to offer solutions. Banks will jump into the fray to find innovative ways to get a piece of the pie.

With the cashless payment system, commuters in passenger service vehicles will no longer be conned of their change, and PSV owners can sleep easy knowing there will be a more accountable way of collecting cash.

Once the profits from this sector begin to be shared out, there will be more money available to power solutions to curb road carnage.

About 3,000 lives are lost each year, and nearly 95 per cent of accidents are a result of human error.

Google is building the self-drive car, which does away with humans as drivers. Safaricom has been leading the “Toa Sauti” campaign to encourage passengers to speak up when PSVs break traffic rules.

If these companies, and others, put their money where their mouth is this year, road safety initiatives stand to make them lots of money, with the added bonus of keeping people alive.

2. Cost of money: Using cheap money to make more money

Many of us are burdened by the rising cost of bread, milk, petrol and other household commodities. But we rarely think about the cost of money.

This year, any investor or business person worth their salt should think about the cost of money — as in, interest rates.

Investors need cheap money to get the chance to make outsized returns.

If Kenya successfully raises Sh130 billion through the sovereign bond expected in the first quarter of the year, interest rates could drop. This is because the bond will reduce the Government’s appetite for local borrowing. It consequently means that banks will be have to lend to individuals and the private sector.

If you are prudent enough, when interest rates drop, borrow and invest wisely. If you invest wisely, you stand to make more money.

However, be weary of the possibility of a rise in interest rates later on in 2014 because, as one analyst put it, the Government might continue to spend, spend and spend some more. This would create an inflationary environment that would necessitate a rise in interest rates.

3.Banking: Branchless solutions

The trend of customers not having to walk into a bank to deposit or withdraw money, deposit cheques or transfer cash to other accounts is going to get even more mainstream this year.

More customers will expect to be able to use their mobile phones or the Internet to carry out their transactions. This will precipitate a technological race in the banking sector.

It will also redefine the purpose of a bank branch. Customers will walk into banks to get financial advice from their banker over a cup of tea.

The opportunities?

Money will always be in fashion, so if you are a techie, think about making apps that solve a problem in mobile banking. And if you own a retail shop somewhere, it is not too late to get into agency banking.

4. Farm management: The rise of the cellphone farmer

Kenyans’ fascination with land is legendary. So what do you do if your chamaa hastily acquired acres of fertile land, but you are all bound to your city jobs and have no time to develop it? Well, consider hiring a farm manager.

This way, your idle land begins to earn you some income and you don’t have to get your hands dirty.

Farm management is gaining popularity in the agribusiness sector, allowing an increasing number of people to engage in agriculture from the relative comfort of their offices.

It takes the form of partnership between landowners, an agribusiness management company and small investors who pool their funds to begin a large-scale operation.

The farming model has been profitable for Outgrowers Management Services, a company that has roped in urbanites interested in farming but who don’t have the time to get into it.

OMS largely grows stevia, which is used to make sweeteners. It has a contract with a Malaysian firm that processes the plant, so investors start with a ready market.

The firm approaches landowners with acres of idle land and secures a lease. It then approaches investors interested in growing stevia, and manages the process — from planting to harvest — for them.

The company makes its money from charging a 10 per cent management fee on the harvest.

The plant is harvested three times a year, with a minimum yield of 1,000 kilos per acre. A kilo of stevia is then sold at Sh105. You can do the math on the proceeds to be made.

There are many unexplored opportunities in farm management. Imagine what you could do with dairy farming in rural areas, for instance, where several farmers have three or less cows.

Think about utilising economies of scale on idle land and you will net the highest possible returns from agriculture.

5. Big data: The potential in numbers

Picture this: You own a set top box that allows you to watch free-to-air stations. Since these STBs are digital, somebody somewhere knows how many viewers are watching which programmes on which stations and at what time. And where they are.

A pattern on your TV watching emerges. Do you mostly watch soaps, for instance? Do you watch TV until the wee hours of a Tuesday, possibly implying you have an off day on Wednesday?

Welcome to big data. It exists everywhere. Think about what patterns emerge by tracking someone’s M-Pesa transactions or their use of a debit or credit card.

Imagine how retailers like Nakumatt, Uchumi or Tuskys  can use the information they collect from loyalty cards.

This data is a goldmine for advertising executives, manufacturers and even the Government.

Debates around exploiting the opportunities in big data are all the rage across the continent, so do not be left behind in finding out how to benefit from it if numbers are your cup of tea.

so do not be left behind in finding out how to benefit from it if numbers are your cup of tea.

6. Entrepreneurship: Cashing in

There is a generation of Kenyan entrepreneurs who started their businesses in the late 80s and early 90s. They set up shop when times were hard and interest rates quite high. But they held out and built very valuable businesses.

Think of Paul Kinuthia, who made a tidy sum by selling a part of his business to French cosmetics giant L’Oreal.

There are many more entrepreneurs like Mr Kinuthia; they are just not in the public domain.

If you are looking to trade up and cash in, this is the year to get your financial affairs in order. With the interest Kenyan firms are drawing from private equity firms, and the opportunity to list on the Growth Enterprise Market Segment (GEMS) at the Nairobi Securities Exchange, this is the year for the entrepreneur looking to attract top dollar.

7. Brokers in the EAC:

Opportunities across borders

The best laid plans of creating a unified East African Community will be well and truly tested this year.

The single tourist visa, free movement of goods and services and other deals are expected to encourage businesses to flourish across the borders. 

And with this country being the most advanced economy in the bloc, you can expect many Kenyans to cross the borders for opportunities.

Most Kenyans, truth be told, thrive on being brokers or tenderpreneurs. Expect your typical Kenyan entrepreneur to know the business gaps in the remotest of towns in East Africa.

It will not be surprising to hear of a Kenyan winning a tender to supply fishing nets to an NGO in the sleepy town of Rumonge in southern Burundi on the shores of Lake Tanganyika. Keep an eye out for regional opportunities.

8. Property: Get to play in the big leagues

Land is an asset class whose price, many Kenyans believe, will defy gravity. So a lot of money is flowing into real estate and construction.

However, not everyone is able to snap up land in booming towns or buy a multi-million shilling apartment in the hopes its price will triple. Which is why the introduction of Real Estate Investment Trusts (REITs) is so important.

REITs work like the shares of companies traded at the stock exchange, but they exclusively focus on the real estate sector.

The company with the REIT reports sales of properties and rental income, which shareholders can get a share of through dividends after expenses are deducted. This segment makes it easier and less expensive to get into real estate. 

Shareholders in REITs can trade their shares at the stock market.

Centum Asset Managers and UAP Investments Limited were the first two firms to be licensed as REIT managers last year.

9. E-learning: Content takes the crown

Kenya is set to start rolling out the one-laptop-per-child programme within the next 90 days.

Education Cabinet Secretary Jacob Kaimenyi in December said the Government would procure 1.2 million laptops and deliver them to schools within in the course of the first quarter of this year. The roll out is expected to cost Sh24 billion.

The project offers significant opportunities for businesses in different industries.

Other than the provision of the laptops — the tender process is expected to start in the coming weeks — there are numerous other opportunities for local businesses in the provision of software, accessories and maintenance services.

These include having running contracts with schools for the repair of the machines, software upgrades and replacing the numerous consumables that come with laptops and networks.

Different reports give varying proportions on the number of primary school teachers who are able to use computers, but all point to the fact that there is a huge percentage of teachers not equipped with skills to teach using computers. Therein lies another opportunity.

Also remember that content is king in the information age. The heavy investment in computers and connectivity infrastructure could amount to nothing if pupils and teachers fail to find content relevant to them.

There has been some progress in growing online content that Kenyans can relate to, but there are still huge gaps.

Safaricom has the Safaricom Blackboard, which offers content and a school management system. The Kenya Institute of Education and educational publishers have made efforts to digitise textbooks, and the Kenya Institute of Curriculum Development (KICD) is expected to unveil digital content soon.

With efforts to put a laptop in the hands of every child gaining steam this year, e-learning will become a major part of education. If you could find ways to make learning more exciting (think along the lines of the app Tichaa, which teaches children Swahili in a fun way), you will be well on your way to fame and fortune.  

KICD approves privately developed content for use by schools.

10. Axis of power: The closer you are, the better off you will be

President Uhuru Kenyatta and his deputy William Ruto will in April mark their first year in office.

By then, it will be clear what direction the International Criminal Court cases against them will take.

The two have been under a microscope. Every single campaign promise they made has been scrutinised. Every public sector appointment they make has generated debate on their policy to reward the youth.

In the last few weeks, politicians who lost out in last year’s elections have found their way into plum Government jobs. These “resurrected politicians” are chairing public sector entities that sit on tenders worth billions of shillings.

For investors and business people, the lesson here is that proximity to power pays. This will hold true this year, so network, network, network.

11. M-Pesa: The killer app

Kenya is on the cusp of a technology-fuelled era of economic growth. At the centre of it all is innovation around mobile applications.

You can shop and pay using even the not-so-smart phones. There is no need to queue to pay school fees, deposit cash in a bank or pay water and power bills.

The game changer in this has been M-Pesa, Safaricom’s mobile money transfer service. It is now in all facets of life.

The service is handy for millions of Kenyans who a few years ago could not access banking institutions near their locality. It has become a key financial inclusion tool, transacting more than Sh2 billion daily.

The service has since been exported to other markets, although the only other country where it has enjoyed huge success is Tanzania, which also has a poorly developed banking system.

The recent introduction of Lipa na M-Pesa will be a hit in 2014. It enables cashless merchant payments.

And this is where you come in. Your customers no longer have to struggle to find change or an ATM before purchasing something from your shop. The platform will encourage consumerism, which works out well for small business owners.  

Safaricom is poised to be the biggest beneficiary in the new regulations that will ban cash payments from PSVs starting July 1.

6. Entrepreneurship: Cashing in

There is a generation of Kenyan entrepreneurs who started their businesses in the late 80s and early 90s. They set up shop when times were hard and interest rates quite high. But they held out and built very valuable businesses.

Think of Paul Kinuthia, who made a tidy sum by selling a part of his business to French cosmetics giant L’Oreal.

There are many more entrepreneurs like Mr Kinuthia; they are just not in the public domain.

If you are looking to trade up and cash in, this is the year to get your financial affairs in order. With the interest Kenyan firms are drawing from private equity firms, and the opportunity to list on the Growth Enterprise Market Segment (GEMS) at the Nairobi Securities Exchange, this is the year for the entrepreneur looking to attract top dollar.

7. Brokers in the EAC:

Opportunities across borders

The best laid plans of creating a unified East African Community will be well and truly tested this year.

The single tourist visa, free movement of goods and services and other deals are expected to encourage businesses to flourish across the borders. 

And with this country being the most advanced economy in the bloc, you can expect many Kenyans to cross the borderstaxis signed on to the Lipa na M-Pesa platform. 

Safaricom’s half-year results show M-Pesa raked in Sh12.5 billion in revenue. A massive Sh94.8 billion of real-time payments are made per month. Person-to-person transactions stand at Sh77.3 billion, while person-to-business ones are at Sh9.9 billion. For the period ended September 30 last year, M-Pesa had 11.55 million 30-day active customers.

12. Digital migration: The future of television

We are likely to switch over to digital broadcasting this year. Those who will make serious money are those who will innovate.

The biggest winners in this changeover will be content carriers such as mobile operators and video-sharing websites like YouTube.

Safaricom has already announced that it is entering the TV market. With the amount of fibre it is laying, the battle might not only be on the screens in our living rooms, but also online. In preparation, the operator has been building traffic by inviting Kenyans to upload videos to its site and selling video clips.

Globally, there is an interesting debate on the future of television. It is expected to undergo the same kind of disruption that occurred with the introduction of the smartphone.

Accenture, a multinational management consulting, technology services and outsourcing firm, says TV will become an even more valuable vehicle for entertainment and, increasingly, for education and information.

But for business leaders up and down the media value chain — from filmmakers and broadcast channels to Internet service providers and “last mile” communications operators — the reinvented TV is a huge disruption. 

In this seismic shift in the world of video content and distribution, businesses will need to quickly grasp the nuances of the changes in the creation, financing, production and delivery of content, and adapt to benefit. 

13. Energy: Switching on industrial growth

High growth rates, technology parks, colourful airports, modern commuter trains, more fibre optics, oil pipelines, bigger ports and more jobs. Kenya is dreaming big.

The grand plan is to catapult our economy, whose growth is currently below 5 per cent, to middle-income status within 16 years. The newly industrialised economy will rival the likes of Singapore and Malaysia. 

To attain Vision 2030, the Government needs to generate 15,000 megawatts, with 5,000MW from geothermal sources. Today, the total effective installed capacity stands at 1,533 MW.

To build these electric railway lines, first-class airports, superhighways, metro trains, large-scale industries, cities such as Konza and ports, Kenya needs the fuel. For this to happen, there has to be a stable, efficient and reliable supply of electricity. 

The Government wants to generate and inject an additional 5,538 MW into the national grid in 40 to 72 months in a bid to lower the cost of power.

The biggest energy move in 2014 will be the shift from unreliable hydropower and expensive thermal-based power generation to green and cheaper natural gas and coal-fired power plants. 

Demand for energy is rising sharply as more consumers get connected and numerous economic activities spring up in the counties. These activities include mining, large-scale irrigation and construction of pipelines for both crude and refined petroleum fuel oil.

Investors and independent power producers that get onto the emerging green and cheaper energy bandwagon will be biggest winners. 

14. Infrastructure: Bridging the divide

Last week, the National Treasury published a list of 47 projects that have been approved to proceed under the Public Private Partnership framework.

The private sector will be a big beneficiary as the State bridges the funding shortfall for key infrastructure projects, estimated to cost Sh255 billion a year.

Priority projects, according to the Treasury, include the construction of a second Nyali Bridge in Mombasa, operation and maintenance of Thika Superhighway, expanding the Mombasa-Nairobi-Nakuru Highway into a dual carriageway, the construction of a transit hotel and the Greenfield Terminal at the Jomo Kenyatta International Airport, and the Nairobi Commuter Rail Project.

These projects require man, and woman, power. And a lot of it. These men and women will need to be fed. Many of them will be working away from home and will need a place to stay. There is also that legal requirement that such projects source at least 30 per cent of their materials from local companies, so millions of tonnes of cement, sand, crushed stones, premixed concrete, lighting fixtures and ventilation will be bought. Contractors will need legal, security, transport and cleaning services.

There will be rich pickings for firms that position themselves just right in this sector this year, and for a while to come.