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How the Rwathia boys carved own corner at Nairobi bourse

FINANCIAL STANDARD
By Dominic Omondi | April 19th 2021
The Rwathia investors. [Graphics, Standard]

The defining board meeting was held in 2002. The location and exact date remain unknown.

The directors of Equity Building Society - most of whom were also its founders - pensively sat around a conference table.

The sons and protégés of the famous Rwathia Boys were onto something big, bigger than what their largely uneducated fathers could have conceived.

They wanted to transform Equity Society into a commercial bank, a sector that was dominated by foreigners and the government.

A decade earlier, the building society was on the verge of collapse. But that was ancient history now to the sons of Rwathia in Murang’a County. They had learnt from their fathers and forefathers that immense benefits flowed from taking risks. They urgently needed Sh700 million to achieve this grand dream.  

The big idea

Chairing the meeting was Peter Munga, who had come up with the idea of Equity Building Society in 1984. Also in the meeting was Jimnah Mbaru, a veteran businessman who at the time headed the Nairobi Stock Exchange (today’s Nairobi Securities Exchange).

The other Equity founder in the meeting was Benson Wairegi, then the chief executive of British American Insurance Company (now Britam Holdings).

The young CEO of Equity Building Society, James Mwangi, who had earlier been tapped to help turn around the company, was also present.

In the end, the British American Insurance Company agreed to give Sh200 million, earning itself a 30 per cent stake in the new bank. 

It is not clear whether Nelson Muguku, the late billionaire chicken breeder, was also present.

Though he hailed from the neighbouring Kiambu County, he was roped in after pumping in Sh200 million from his poultry business into Equity, earning himself a 30 per cent stake in the new lender as well.  

The remaining Sh300 million worth of shares were bought by other individuals.

It was a stroke of genius. Four years later, Equity Bank went public and listed at the Nairobi Securities Exchange (NSE), creating what might as well be a ‘Rwathia Corner’ at the bourse, with Britam Holdings and Housing Finance Group cuddling each other financially.

Thanks to their foresight, the financial prowess of these Rwathia progenies has grown by leaps and bounds. Today, their wealth is much bigger and more secure than that of their fathers like Mzee Gerald Gikonyo, who was among the pioneers, starting out in the 1930s hawking vegetables, selling charcoal and wattle bark.

And while their fathers built the now-ageing retail stores in Nairobi’s downtown by pooling their savings, they have literally helped create Kenya’s financial district of skyscrapers in Upper Hill by attracting billions of dollars from all types of investors from around the world.

These village friends, some of whom went to the same primary schools, still play golf together during weekends.

And on weekdays, their paths cross during board meetings of the three companies where they are either directors or shareholders. Their estates, which include properties and shares, have also swelled.

Individually, or through proxies, these children of Rwathia and their associates are estimated to control over 40 per cent of the shares at the NSE, according to Dr Bitange Ndemo, a business lecturer at the University of Nairobi.

Stake in Safaricom

The Rwathia boys also have a substantial stake in Safaricom, which has a market capitalisation of over 60 per cent.  

By the time of his death in 2010, Muguku had a Sh3-billion stake in Equity, making him the largest individual shareholder.

Wairegi, who revealed in an earlier interview with Financial Standard that he pumped into Equity Sh30,000 at its inception in 1984, has seen his seed capital balloon more than 10,000 times to Sh323.5 million.

His shares at Britam, whose portfolio has grown in tandem with Equity’s, are valued at Sh718.7 million. Mr Wairegi has since retired as Britam CEO and board member but is still a director at Housing Finance Group where Britam holds a large stake.

The founders of Equity are, in one way or another, active either as directors or shareholders of the three companies.

Mwangi and his wife have shares in Equity and Britam Holdings. Munga has shares in Britam and Equity, and is a director at Housing Finance, while Mbaru has shares in Britam and is also a director at Housing Finance Group.

The Rwathia Corner is just the core of what is essentially the Murang’a axis at the NSE.

The Murang’a axis also includes UAP Insurance (now UAP Old Mutual) and Centum Investments, which is owned by billionaire Chris Kirubi, and Trans Century, where investment banker Mbaru is also actively involved.  

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