Wednesday, 29 August 2018

Kenya Airways to Hire 100 pilots, a year

KQ: Turning around, plans expansion

Kenya Airways Plc
 has plugged 30 per cent of its financial hole, reporting a decline in its loss in the first half of the current financial year.   Its losses stood at US$39.7 Million from $56.7 million a year ago.

Further, the third largest airline in Africa plans and aggressive growth of its fleet and expand to 20 new routes in the next five years. Consequently, it plans to hire as many as 100 pilots a year over the next five years, Chief Executive Officer Sebastian Mikosz said.
The carrier is facing “significant operational challenges” and needs as many as 70 additional first officers and 50 captains to operate its current fleet of 40 aircraft, along with new aircraft it plans to acquire, Mikosz said.
 The airline, which begins direct flights to New York from Nairobi ion October 28th, is preparing to take back five aircraft sub-leased to Oman Air Transport and Turkish Airlines from October and needs more people to fly them, he said.

KQ, as the airline is known, on Wednesday reported a 3.1 per cent growth in revenue to 51.2 billion shillings. The stock climbed 0.5 per cent in Nairobi, paring its loss so far this year to 38 per cent.
Analysts think the airline is up to something: "The biggest concern they have is new revenue,” Mercyline Gatebi, head of research at Kingdom Securities Ltd. in Nairobi. “If the foreign pilots are coming at cheaper negotiated rates, it means the cost-benefit analysis is well thought out and it may be of benefit for Kenya Airways’ top line.”
The carrier could source some experienced foreign pilots in order to save on training costs, according to Gerald Muriuki, an analyst at Genghis Capital Ltd. There are fears though that the Kenya Pilots Union may oppose the hiring of foreign pilots, he said.
It targets the troubled South African Airways, for some experienced pilots.
“There is no other way because we cannot have a situation where lack of crews is blocking the growth of the airline,” he said. “There are always emotions when you change things, but that’s life.”
The Pilots’ Union’s opposition if any, say, analysts, may receive hostility from the government which is the majority shareholder in the airline. In the recent past, the government of Kenya has been quite uncompromising with labour unions.

 And since the airline is facing stiff Competition in the African airspace from Ethiopian Airlines which is expanding aggressively, it may not entertain labour movement’s wiles. 

Monday, 27 August 2018

Uhuru’s Visits:What’s in it for Kenyans?

The Ngong Tunnel of SGR: 
Could spawn Industrialization Binge
 Meeting three Heads-of- state in 10 days spread across the globe! That is a tight schedule for Uhuru Kenyatta, Kenya’s President. And we would be right to ask; what’s in it for us? Plenty seems to be the answer.
 Let’s start with the US where the President is meeting President Donald Trump. What’s in it for us? Economics: Trade, investment. No begging bowls. Trade and investment –Quid pro Quo. Uhuru is there to market Kenya as an investment destination for American investors – not Government and NGOs.
 Kenya needs power, good roads and other infrastructure to unleash its growth potential and create jobs, reduce poverty and improve the standards of living in the country. It targets being a middle-income country (per capita income above $5000) in the near future. To achieve this, she needs investors to build industries in Kenya to put the youth to work.
To attract investors, she needs enabling infrastructure and enabling infrastructure is expensive. Foreigners, both in the West and East have the financial muscle to support such investments for a return.
Africa Development Bank, in its Economic Outlook 2018, says that Africa needs to invest $170 billion a year over the next seven years in productive and profitable infrastructure in order to industrialize. The continent can only raise US$50 billion of these from tax revenues, leaving a yawning gap of $108 billion.
Out there, fund managers, commercial banks, and sovereign funds are sitting over US$100 trillion seeking for investment avenues. Africa can tap into the well by crafting bankable debt instruments, says AfDB.
Which brings me to Uhuru’s goal in his visits with three foreign heads-of-state in the next ten days- Trade and investment.  And on this one, there is congruency of purpose with his peers. He is shopping for investors (and lenders) to invest in Kenya, they are looking for trade and investment opportunities (and borrowers) in Africa, “the rising continent.”
We have sunk billions of dollars in infrastructure development raising our national debt to previously unknown highs. In the process, it has generated hue and cry in Kenya. So how do we make those investments repay the debt and how will the ordinary taxpayer benefit?
Attract investments in industrialization in order to create more taxpayers to help foot the bill. Also, expand the markets for our current products. Kenya is famous for growing flowers and exporting them to Europe but now we need to explore new markets. The US is one such market that was shielded by distance. But now with Kenya Airways gearing to fly to the US in two months’ time, that market is only 15 hours away. More flowers sold means more people employed, bigger profits and more taxes for the exchequer.
In the US, there is a campaign to transfer the supply chain from Asia back home. But the campaigners miss one point: The firms moved their productions plants to Asia because of the high cost of labour. Has it declined at home? The answer is probably No.
 That means the firms will have no incentive to return their production lines to the US. Probably, they will go elsewhere and that elsewhere is Africa, Kenya included. Africa was sidelined in the past because of poor infrastructure. Now the Chinese have invested in infrastructure making Africa a viable option.
Proposed Konza Techno City
So such investments that some commentators have dismissed as white Elephants could soon become the goose that lays the golden egg. Among these is the SGR which has everyone shouting “white Elephant.” It could spawn an industrialization binge that will have them eat the humble pie.
In our highly competitive world, speed is everything. Markets need efficient delivery of products and efficient delivery needs good transport systems- be they airports, roads, seaports or Railway lines. And Kenya has invested and continues to invest in such enabling infrastructure.
So the proposed widening of the Mombasa road to a six-lane highway, which critics say is unnecessary, could turn out to be the selling point for Kenya in terms of attracting investment. The proposed Konza City could soon just live up to its ambition of becoming Africa’s silicon savannah. Why? Because it is served by high-speed roads and Railway.
To attract investments, these are the infrastructure the President has to showcase in order to widen our trade portfolio and markets.  According to a document by Uganda’s Ministry of Transport, the country’s goal is to produce High-end products for high-end markets by 2040. To achieve that, the Ministry recommended that Uganda builds its SGR from Malaba to Entebbe. That way, it shall have a seamless transport within 24 hours to the Port of Mombasa. Consequently, the Ministry rejected the Dar-es-Salaam link because it could not guarantee such speeds. The Central Corridor has the Lake Victoria to grapple with.
 Kenya is way ahead in that exports will reach the Port in 10 hours. Kenya is therefore also angling to produce high end products for high end markets. That is in addition to our traditional exports, coffee, tea, cut flowers, Horticultural produce including Macadamia nuts, avocados and vegetables.
Kenyan Cut flowers: Need wider Market
 Britain and the US are significant sources of investment funds for industrialization and some investments in infrastructure. But give infrastructure to China. They have proven competent by completing their projects in time, nay, ahead of schedule and at cost.
China, the second largest economy in the world is creating more millionaires a year than the West, and is thus a potential market for our flowers and other “luxury goods.”
 Kenya’s literacy level is 89 per cent. That makes it a potential investment destination for manufacturers looking for trained or trainable manpower. In fact, educated manpower and high unemployment is a plus. Investors will not have to worry about labour productivity!

So should Uhuru stop marketing (and borrowing for) Kenya? Well,
that is part of his job as President.

Monday, 13 August 2018

Why Hydro Energy is losing glitter in Africa

 A hydro dam: Losing glitter
Every cloud, so the saying goes, has a silver lining. That is true of the electricity generation industry in Africa. Although the continent is blessed with various sources of power generation. It is energy poor. This is because of the tragedy of poverty in the continent. Developing such sources as Hydro, which is the leading source, is expensive and slow to implement and complete.
 Estimates show that the current demand for power in sub-Saharan Africa is about 100GW of which 22 percent or22GW, is supplied by hydro. This means that 78% of electricity in Africa is provided largely by thermal sources including diesel-powered generators and Coal. By 2040, electricity demand will rise to 385 GW and Hydro will generate only 100GW of this, leaving the bulk of the demand to be supplied by other sources. Hydro, despite being a plentiful resource in Africa, is surely the bottleneck to economic progress in the continent.
One of the causes for the slow growth of hydropower is the high investment outlay required to build a Hydro dam.  The upfront expenditure to develop a hydro dam is beyond the means of many an African government.  The second hurdle is the previous insistence by African governments that only the state-owned operators were allowed to build capacity. Consequently, demand outstrips supply by a large factor.  
A Geothermal plant: Gaining popularity
To meet growing demand, African governments, which for a long time were the only legal investors in hydro generation, relied on expensive fossils generated power. Many deep-pocketed investors in Africa, invested in own generators making the price of local products expensive and uncompetitive. That is why many factories in Africa operate below capacity, at a range of 45-50%.
This is a recipe for growing unemployment and poverty. According to the World Bank, Energy poverty shaves off four percentage points from economic growth.
 To turn around its fortunes, Africa has opened its power generation sector to the private sector in a bid to attract more investments in the sector and bouy economic and social progress.  This, combined with the declining cost of other potential sources, has rekindled interest in various sources such as wind, geothermal and Solar.
Wind and geothermal are proving the most popular and are growing into an industry within the sector. In just about five years, Wind is emerging as the top industry in the energy sector. So far an estimated 4300MW are already on stream and more are in the pipeline.

South Africa is the leader in the wind industry with 1170 MW already on the grid. Construction for another 700MW is set to begin later this year and come live by 2021. South Africa targets 8GW of wind-generated power by 2030.  Others are; Morocco 920MW; Egypt 750 MW; Ethiopia 320 MW; Kenya 26 MW.  Morocco is targeting 2GW of wind power by 2030.
Kenya, a late entrant in the wind industry, is expected to leapfrog Ethiopia in a Month’s time when the 310 MW Lake Turkana, the largest wind farm in Africa, will connect to the national grid.  This will raise the total wind-generated energy to 336MW. It is the commissioning of this project that will raise Africa’s Wind power capacity to 4300MW. Meanwhile, two other projects with a total capacity of 200MW are in the pipeline.  Kenya’s wind potential is said to be 3GW.
Lake Turkana wind farm: green is becoming a Fad
 Apart from wind, Geothermal has also picked up tempo in Kenya which already generates 700MW, placing it at the top in Africa and ninth in the world.  Some 270MW is expected on the grid next year.  That will push geothermal to the number one slot of energy source in Kenya. The geothermal potential in Kenya is estimated at 10GW. Already, green energy is dwarfing hydro in Kenya and the trend could continue elsewhere in the continent.
So why has green energy become popular in Africa? Two factors; wind speed and cost of investment. Utility-scale wind power plants require a minimum average wind speed of 6 m/s (13 mph). This is readily available in coastal regions of Africa. It is then not a surprise to find that the best wind in Africa is located in the coastal regions of the continent. The five biggest markets are also originated from these areas.
The upfront investment to produce a Megawatt of wind power is estimated at US$2 million. Thus five projects with a capacity of 700MW in South Africa will cost US$1.4 billion, Enel, the Italian developer of the projects reported last week. This compares well with the US$700 million invested in Lake Turkana wind to produce 310MW.
 This, experts indicate, is what it will cost to do a feasibility study for a hydro dam project. In addition to the pocket-friendly cost, a wind power construction takes about two years to complete. A hydro dam will take about ten years to complete if the expected duration of the 20MW Thwake dam in Kenya is anything to go by.
One more advantage, Wind farms and solar parks can also provide decentralised or “off-grid” power directly to customers, reducing the load on congested transmission lines.  This will reduce the cost of power to the consumer for it cuts down the loss incurred on transmission lines.
 Innovation in the geothermal industry is also cutting the development period and attracting the private sector. Here, a government agency sinks the Wells and caps them, then invites the private sector to generate power in a PPP arrangement. Kenya has already leased Menengai Wells to the private sector to generate 105 MW. This arrangement lets the agency, Geothermal Development Corporation to focus on sinking Wells, leaving the power generation in other hands.

Africa’s demand for electricity is projected at 385GW by 2040. Hydro will supply only 26 percent of this demand. That says it is a slow growth industry. Given the slow pace of development and the high sunk costs, for which the private sector has no stomach, hydro development will soon become a longer-term investments to supplement other sources that can be developed rapidly to meet growing demand.

Monday, 6 August 2018

KQ's Direct Flights to New York: It's big business

The Pride of Africa: leading the way
The Count-down has begun. We are two months away from Kenya-Airways’ direct flights to New York from Nairobi.  Save for any unforeseen occurrence, the deal is done.

For Kenya, the start of Direct flights to the USA is more than just our colours on American airspace.  It is big business and means more jobs at home. A number of stakeholders are salivating over the prospects of getting a foothold on the US market.

 Cut flowers exporters have all along been salivating over the US market, the largest cut-flower market in the world. However, the cost of delivering them has been a draw-back.

Cut Flowers: Gunning for  10% stake in The US
Now with Direct flights, the market has drawn closer to home. It is only 15 hours away! The US Cut-flower market is estimated at US$ 2.5 billion and is dominated by Colombia which controls a large chunk of it.
Kenyan flowers have a tiny 0.4 percent of this humungous market and officials in Nairobi are baying for a 10 percent stake.  That is a whopping US$250 million!  No wonder, Kenyan flower exporters are salivating for the direct pie of the cake.

 The officials say that direct flights will make this possible since the cost of delivering cut flowers to the US market is a great drawback.

A Textile  mill: Leading exports to the US
Apart from flowers, other producers who would benefit from the Direct flights include Macadamia nut growers whose market share has been on the up and up.  Last year, Macadamia nuts exports hit the US$5 million mark. The direct flights will ease delivery and cut delivery time to just 15 hours.

 Lack of direct flights has been blamed for a lot of ills bedeviling Kenya’s ambition to enter the US market in a big way. Apparel exporters blame the long distances for failure to deliver on time. They say that it takes 135 days to fulfill an order. 75 of these are taken by delivery of yarn from Asian countries to make apparel.

Also eyeing the US market is Rivatex Mills which is modernizing its plant in order to set A foot on the US Market. Apparels exports form lion’s share of all exports to the US under AGOA, the preferential trade arrangement design to support Africa exports to the US.

Macadamia Nuts: Presence being felt
Last year, the sector earned $370 million from Exports to the US. That was a huge chunk of the US$570 million worth exported from Kenya last year.  Kenya hopes to leap-frog exports to the US market significantly with the direct flights.

Avocado, the new kid on the block is also said to be eyeing the US market as are coffee roasters. Then, of course, the Kenyan travelers to and from the US. No longer will they fly to Amsterdam or Addis-Ababa before they land home. For these, it will be a leap across the Atlantic to Nairobi.


Given all these hanging fruits, it is no wonder the government has doggedly invested in the improvement of Jomo Kenyatta International airport over the last decade. The African Development Bank estimates that construction of the US$350 million second- modern runway at the hub will generate an additional US$20 million a year to  Kenya’s GDP. Now we see how!