This man, Mbaru is a business wizard

By Kenneth Kwama

There is a ridiculous piece of history that former Nairobi Stock Exchange (NSE) Chairman Jimnah Mbaru, doesn’t like to be reminded about. It happened last year when the firm that he owns, Dyer and Blair, bid a mockingly low figure of five cents and won the key advisory role for the Kenya Reinsurance Initial Public Offer (IPO).

Mbaru and Equity Bank Managing Director James Mwangi in a celebratory mood after the bank’s shares were listed at the Nairobi Stock Exchange. Photo: File

When the best opportunity to make money working as lead advisors during Safaricom’s IPO early this year, Mbaru engaged in a style of play known in poker parlance as "super loose aggressive."

This means that his five cents bid, which won him the bid to perform the lead advisory role in the two IPOs, bucked both the odds and common sense. After he won the deal, other stockbrokers accused him of trying to lock them out of business unfairly. The flap was just one indicator of just how shrewd Mbaru could get.

It also showed the intensity and passion with which the man who has earned himself the sobriquet "The Godfather of Investment Banking," was willing to stray beyond what was considered normal in business realms, to get whatever he wanted.

The frequency and volume of the IPOs and rights issues where Dyer and Blair has acted as lead transaction advisors speak volumes about Mbaru’s mettle and unflinching quest for business. The IPOs include those of Kenya Re, Safaricom and Co-operative Bank. His company also oversaw Kenya Commercial Bank’s (KCB) rights issue. Besides the stock market where his hand has been reported in virtually every major deal, Mbaru is also a founding member of the investment firm-Transcentury Group (G29).

Documents in our possession list, for the first time, the entire membership of Transcentury and their share allocation.

According to the documents, Mbaru was the sixth largest shareholder at Transcentury as at May 28, 2007. He owned 1.17 million out of the total 19.6million shares in the investment company’s portfolio.

Transcentury is mainly comprised of high profile individuals, but inside sources told FJ that Mbaru is the one who does the heavy lifting.

"They bestowed him the duty because of his needle-sharp brain and thick skin that always come in handy whenever he wants to negotiate for a deal. They don’t know a person who can push better than him," said our source.

Through the years, Mbaru has earned a reputation as a business wizard who has worked hard to construct the complex vehicles that the companies he is associated with drove on the road to explosive growth.

For example, he is known to be the provider of the strategic vision behind Transcentury, and has helped transform its once conservative culture into a swaggering, deal-making cult that now has major stakes in myriads of big companies around the country.

The investment group comprises a lineup of powerful people, including State House operatives, a former permanent secretary in the Ministry of Finance, a serving senior official in the Attorney General’s office and a serving MD of a state corporation, amongst others. The company’s interests spans several companies and it is the controlling shareholder in the East African Cables Ltd (EACL). It is also the largest minority shareholder in Rift Valley Railways (RVR) where it owns a 20 per cent stake. It also has significant shares in Development Bank, Equity, Kenya Power and Lighting Company and Avery east Africa Ltd, amongst others.

Transcentury’s stake

Transcentury acquired 75 per cent of EACL in 2003 from industrialist, following Naushad Merali, founder of the Sameer Group for Sh240 million. But the company’s value has since hit Sh10 billion, partly uplifted by massive upward run of the price of its shares at the NSE about two years ago. This means that Transcentury’s stake in the cable maker today is about Sh7.5 billion.

Besides being the co-Managing Director (MD) of Dyer and Blair Investment Bank, Mbaru also holds significant shares in a number of companies spluttered across different industries.

During his tenure as NSE chairman, he weathered expositions of fairy tales and accusations of inflated or manipulated stock values, conflicts of interest and insider trading.

Mbaru’s tenure also saw several downturns, but one of the most memorable was the collapse of Francis Thuo Stockbrokers, which went belly-up with an estimated Sh122 million of client money.

Just months after Francis Thuo’s collapse, the NSE under Mbaru, was again forced to deny speculation that another stockbroker-Nyagah, was in trouble. Mbaru delivered the official denial of this fact, but even before he could pull back his breath, the stockbroker collapsed and sunk in with hundreds of millions of shillings of investor funds.

The NSE later rolled out a Sh100 million rescue package to Nyagah Stockbrokers and justified the rescue package on grounds that the bourse wanted to "support investors who had bought shares through that stockbrokerage firm."

Although there are no clear records of the investors who were compensated with the fund, so it is still not clear who really received the money.

Flirt with politics

So successful has been his deals that in business circles, Mbaru is now known as the man who gets whatever he wants, and on record, has lost only once, but in a different field; politics.

In 2002, Mbaru flirted briefly with politics and went on to contest for the National Rainbow Coalition (NARC) party candidate’s ticket for Starehe Constituency. He won, but the ticket was later given to former area Member of Parliament (MP) Maina Kamanda in controversial circumstances.

Mbaru later quit Narc and vied for the parliamentary elections on a Safina ticket, but lost the ultimate battle to Kamanda.

Immediately after the elections, he ditched Safina and rejoined Narc, saying he had rejoined a party he originally belonged to, and would work closely with it and President Mwai Kibaki to assist in "reconstructing the country." He went on to absolve himself from blame, saying it was unfortunate he had responded to pressure from his supporters to seek nomination on another party’s ticket after losing the Narc ticket.

During the run up to last year’s elections, Mbaru who was then chairman at the NSE said that if the Orange Democratic Movement (ODM) remained intact and fielded one candidate in the elections, it would cause uncertainty at the bourse, a declaration that was later dismissed as a mischievous attempt to use his platform to openly campaign for Kibaki.

Mbaru’s quest to curry favour with the ruling political class is not something hard to fish out. He has succeeded at the backdrop of successive problems with Kenya’s political class.

For instance, the 1980s saw Moi’s administration takeover Mbaru’s bank, which was then known as Jimba Credit, in the name of streamlining the banking industry.

The operation was conducted during the tenure of Professor George Saitoti, the then Minister for Finance.

Around that time, Mbaru was believed to be owning more shares in KCB, than the government. He later bought Dyer and Blair Stockbrokers Ltd — which has since become his signature venture — from KCB, at Sh400,000.

Own terms

He speaks to the media on his own terms and rarely responds to requests for interviews, unless he has a pressing issue similar to the one he addressed about the recession in the country about a fortnight ago. FJ could not reach him for comments. While many agree that the man has done a lot for the stock market in the country, others think that the bulk of what he has done was for personal benefit.

"In fact most of his colleagues at the NSE believe that for some reasons, most of his actions while still chairman at the bourse, always appeared to favour his investment firm," said one source.

His career

Born in 1947, Mbaru obtained his Bachelor of Commerce degree in 1967 and a Bachelor of Laws (LLB) degree in 2002, both from the University of Nairobi. He also has a master’s degree in Business Administration (MBA) and is an Associate Professor at the University of Stellenbosch in South Africa.

In addition to the sound academic background, he has acquired a wealth of experience in management and entrepreneurship, through heading (directorship and chairmanship) of several financial and non-financial institutions in different sectors of the economy.

He started out his career as a trade officer at Jogoo House. Those who know him say he has always had a high-wattage intellect, starting from his days as an undergraduate student at the University of Nairobi.

Flush with a little cash and the ambition to make more, young Mbaru began investing in stocks while still a student. Since then, he has made immense contributions towards the development of stock markets in Africa.

Some of these contributions are evident in the role he has played in developing the capital markets in the continent through serving as a chairman of African Stock Exchanges Association.

Despite questions about the timing of Safaricom’s IPO, and the fact that the infrastructure that was needed to facilitate it was either in crumbles or operating at half capacity, Mbaru and then Finance Minister Amos Kimunya, were relentless in their push to have it concluded.

It was successfully done and coincidentally, acted as Mbaru’s last major duty as NSE chairman. The IPO took place while Mbaru was serving on notice.