MONETARY POLICY COMMITTEE MEETING, 1ST FEBRUARY, 2012

RESTORING PRICE STABILITY

The Monetary Policy Committee met on 1st February, 2012 to assess the economy’s response to its previous monetary policy decisions as well as review domestic and international economic developments. The Committee noted that overall inflation continued to gradually decline for the second consecutive month, dropping from 18.93 percent in December 2011 to 18.31 percent in January 2012. This was mainly on account of easing food and fuel prices supported by the appreciation of the Kenya Shilling. Further, private sector credit growth declined in December 2011 in response to the tight monetary policy.

The Committee observed that inflation is expected to continue to ease in the coming months on account of the current monetary policy stance, stability of the exchange rate, decline in oil prices, and continued easing of demand pressures with the slowdown in private sector credit growth. Furthermore, reduced credit to finance imports is expected to ease pressure on the exchange rate.

The Committee’s analyses of available information revealed the following:
• The banking sector remains stable with a limited threat of loan defaults following the recent measures taken by the Kenya Bankers Association to cushion borrowers against high interest rates. Moreover, the Government’s planned external commercial financing as part of its domestic borrowing requirement in the fiscal year 2011/12 is expected to dampen upward pressure on interest rates. In addition, the continued coordination of fiscal and monetary policies will sustain the growth potential.
• Balance of payment pressures and the persistent uncertainty in the global financial markets due to the debt crisis in the eurozone remain the main risks to the inflation outlook and exchange rate pressure.
• Private sector credit growth has declined but needs to slow down further to dampen demand-related inflation pressures.
• The Meteorological Department has forecast a dry spell in most parts of the country as well as frost in February 2012. This presents risks to agricultural production and food supply.
• The geo-political risks associated with oil movement through the Strait of Hormuz could interrupt crude oil supply and affect fuel prices globally.
• A continued increase in diaspora remittances signals confidence in the economy despite the recent external shocks.

In view of these developments and the need to ensure that inflation declines to levels consistent with the Government’s target, the Committee decided to retain the Central Bank Rate at 18.0 percent. This will allow time for the policy measures in place to work out and deliver decisive results on inflation and inflation expectations.

PROF. NJUGUNA NDUNG’U, CBS
CHAIRMAN, MONETARY POLICY COMMITTEE

More about Citi Journalistic Excellence Award
* The Citi Journalistic Excellence Award began in 1982 as a way to recognize journalists for excellence in financial and business reporting in the markets in which Citi does business around the world.
* The Columbia Seminar gives participants rigorous workshops in the principles of accounting and finance and exposure to a wide-ranging view of financial and economic issues, including those which affect their own countries. Journalists participate in sessions with leading Columbia University faculty members, engage in discussions with senior academicians and policy-makers, and visit key financial institutions and U.S. Government departments. Visits have included the New York Stock Exchange, Standard & Poor’s, Bloomberg Business News and the Federal Reserve Bank. The Seminar also includes a day of events with executives and speakers from Citibank.
* Requirement of English proficiency.
* All entries must include an autobiographical essay written in ENGLISH of no more than 1000 words which describes the entrant’s career as a business journalist and what he/ she hopes to gain from this experience.
* Electronic media (radio or TV) must submit a transcript in addition to the broadcast in video or audio tape.

Portland, January 26th, 2012

South Africa, Nigeria, Kenya, Egypt and Morocco lead Tweeting on the continent

Young people Tweeting from mobile devices are driving the growth of Twitter in Africa, according to How Africa Tweets, new research launched by Portland in Nairobi today.

In the first ever attempt to comprehensively map the use of Twitter in Africa, Portland and weetminster analysed over 11.5 million geo-located Tweets originating on the continent during the last three months of 2011.

This pan-African analysis of Twitter traffic was complemented by a survey of 500 of Africa’s most active Tweeters.

How Africa Tweets found that:
South Africa is the continent’s most active country by volume of geo-located Tweets, with over twice as many Tweets (5,030,226 during Q4 2011) as the next most active Kenya (2,476,800). Nigeria (1,646,212), Egypt (1,214,062) and Morocco (745,620) make up the remainder of the top five most active countries.
57% of Tweets from Africa are sent from mobile devices.
60% of Africa’s most active Tweeters are aged 20-29.
Twitter in Africa is widely used for social conversation, with 81% of those polled saying that they mainly used it for communicating with friends.
Twitter is becoming an important source of information in Africa. 68% of those polled said that they use Twitter to monitor news. 22% use it to search for employment opportunities.

African Twitter users are active across a range of social media, including Facebook, YouTube, Google+ and LinkedIn.
Mark Flanagan, Portland’s Partner for Digital Communications, says: “One of the more surprising findings of this research is that more public figures have not joined Africa’s burgeoning Twittersphere.

With some notable exceptions, we found that business and political leaders were largely absent from the debates playing out on Twitter across the continent.

As Twitter lifts off in Africa, governments, businesses and development agencies can really no longer afford to stay out of a new space where dialogue will increasingly be taking place.”

How Africa Tweets found that Twitter is helping to form new links within Africa. The majority of those surveyed said that at least half of the Twitter accounts they follow are based on the continent.

Beatrice Karanja, Associate Director and head of Portland Nairobi, says: “We saw the pivotal role of Twitter in the events in North Africa last year, but it is clear that Africa’s Twitter revolution is really just beginning. Twitter is helping Africa and Africans to connect in new ways and swap information and views. And for Africa – as for the rest of the world – that can only be good.”

Portland hopes that this survey will serve as a benchmark for measuring the evolution of Twitter use in Africa, shedding new light on how Africa communicates nationally, regionally and internationally.

The Authority developed the policy and regulatory framework in conjunction with the Nairobi Securities Exchange (NSE) and the Central Depository and Settlement Corporation (CDSC).

The introduction of the Growth and Enterprise Market Segment (GEMS) at the NSE is largely informed by the Government of Kenya’s identification of micro, small and medium enterprise sector as one of the key drivers of Vision 2030.

Speaking from her office, Mrs. Stella Kilonzo, Chief Executive of the Authority said, ‘The SME market is intended to offer issuers benefits by permitting for listing by introduction, without a public capital raising component, and is aimed at seeing enterprises broaden their shareholder base, gain access to open market valuation through market price discovery

Mrs. Kilonzo observed that the policy is also in line with the sessional paper No. 2 of 2005 on development of micro and small enterprises for wealth and employment creation for poverty reduction, which identifies limited access to financial services as one of the major constraints inhibiting the growth of the MSME sector. A report titled Impact Investing- Challenges and Opportunities in the East Africa ICT Sector produced by the Authority in conjunction with the Rockefeller Foundation identified viable SMEs with Investment opportunities.

In the long term, the SME market will gain from access to long term capital by introducing modalities for the public offer of securities by SMEs thus enabling SMEs to raise capital through share offers.

Mrs. Kilonzo expounded that the approved policy and regulatory framework necessitates companies aspiring to list in the GEMS at the NSE to have minimum capitalization of Sh10 million, with no trading record or profit history required. The SMEs will also be required to appoint a duly vetted and approved nominated advisor who will be responsible for overseeing compliance of the company with all their listing and continuing obligations and is expected to ensure that at least one third of the company’s directors undergo a corporate governance director’s induction program.

Mrs. Kilonzo said that the creation of nominated advisors is aimed at reducing the costs associated with building up internal capacity for listing prior to a company coming into the market, thereby reducing the operation costs and encouraging wider participation by SMEs.

The Growth and Enterprise Market Segment is expected to be operational by June 2012

Wednesday, December 14th at the same select committee sitting, MP Shakeel Shabir mentioned that Barclays Bank, Standard Chartered Bank, Kenya Commercial Bank, Equity Bank and Family Bank are the banks said to have been accused by the CBK.

Reports indicate that a number of commercial banks ceo’s at the sitting have refuted these claims. While the source or authority of Shakeel’s accusation is yet to be veriefied by Bizextras. The same’evidence’ or ‘false accusation’ from the MP will be published here if we get the details.

MONETARY POLICY COMMITTEE MEETING
1ST DECEMBER, 2011

SUSTAINING MONETARY POLICY DIRECTIONS TO FIGHT INFLATION

The Monetary Policy Committee met on 1st December, 2011 to assess the economy’s response to its previous monetary policy decisions and the economic developments since its last meeting. Although inflation in November 2011 had continued to rise, the rate of increase had slowed down. Food and fuel prices continue to be the key factors driving overall inflation. The Kenya Shilling has been appreciating strongly and private sector credit growth, which had been observed to be exacerbating demand pressures on inflation, eased in October 2011. These developments supported analyses showing that the tight monetary policy stance adopted by the Committee is achieving its desired results. However, the response with respect to inflation is yet to be felt.

The information analysed by the Committee showed that most commercial banks had revised their base rates, effective lending rates, and deposit rates upwards. The rise in deposit rates reflects increased competition for deposits amidst tight liquidity conditions and is expected to promote savings. The tightness in the market was also noted to have dampened demand for imports, thereby easing pressure on the exchange rate. Furthermore, banks were noted to be revising their asset portfolios with a significant number offloading some of their foreign exchange holdings to the benefit of the exchange rate. In addition, it was noted that several banks had commenced discussions with borrowers with a view to restructuring loans and refinancing arrangements to avoid any threat of default. The Committee noted that this is an appropriate process to be formally encouraged to work out modalities that would enhance these short-run measures to protect borrowers and banks alike.

The Committee noted that although supply shocks continued to drive domestic prices upwards, demand driven inflation pressures arising from the growth of private sector credit continued to persist. In addition, it was noted that there were exchange rate risks emanating from uncertainty in the global financial markets due to the debt crisis in the eurozone. In order to address these risks, the Committee considered it necessary to further tighten the monetary policy stance at the margin.

The Committee noted that since inflation continued to increase in November, 2011 and other policy measures, including the Cash Reserve Ratio raised in the last MPC Meeting were still transmitting through the market, it was necessary to enhance these monetary policy actions. The Committee therefore decided to revise upwards the Central Bank Rate by 150 basis points from 16.5 percent to 18.0 percent. This is expected to ease inflation and contain inflationary expectations.

PROF. NJUGUNA NDUNG’U, CBS
CHAIRMAN, MONETARY POLICY COMMITTEE

1st December, 2011

East Africa’s leading hotel chain, Tourism Promotion Services (TPS), Serena Hotels will
officially include Dar es Salaam Serena Hotel to its City Hotel Portfolio after the Royal
Palm Hotel, previously managed by Mövenpick Hotels and Resorts, which will be
rebranded to the Dar es Salaam Serena Hotel on 1st December 2011.
TPS (D) Limited is the acquiring company owned by the Aga Khan Fund for Economic
Development (AKFED), TPS Eastern Africa Limited (TPSEAL), PDM (Holdings)
Limited, PROPARCO and NORFUND.

The Mövenpick Royal Palm Hotel, a 230-room five-star hotel based in the largest city in
Tanzania will be renamed the Dar es Salaam Serena Hotel from December 1, 2011.

Dar es Salaam Serena Hotel is strategically located within the commercial, business and
diplomatic district. The Hotel will be positioned as the premier up-market five star Hotel
for the discerning corporate and leisure clientele and offer the finest food and beverage
outlets as well as conference and banquet facilities. Each of the 230 rooms has a
spectacular view of either the Garden, Golf Course, Indian Ocean or the City.
Mahmud Jan Mohamed, the Managing Director, TPSEAL, said that he was pleased that
the hotel group has finally established presence in Dar es Salaam which is in line with our
medium to long-term strategy of completing Serena Hotels “City Hotel Circuit” in the
East Africa region. He added, “with our existing Serena Portfolio, the hotel will benefit
from the Groups regional presence and we can offer a circuit covering Tanzania, Zanzibar,
Kenya, Mozambique, Rwanda, and Uganda. We aim to expand this circuit, both in this
country and elsewhere.”
“Serena Hotels is committed to offering a quality product to our clients, exciting careers
for our staff (currently employs 3,400 East African staff at the Serena properties in
Tanzania, Zanzibar, Kenya, Uganda and Rwanda), and satisfactory returns to our
shareholders and stakeholders. We are responsible hotel operators who care for the
physical, social and economic environment of the areas in which we operate. We believe
that the expansion of the Serena brand in Dar es Salaam will strengthen Tanzania’s
position as a key player in the meetings, incentives, conferences and events segment
whilst also attracting the leisure clientele”, said Mr. Jan Mohamed.

The Dar es Salaam Serena Hotel is the latest addition to the TPS, Serena Hotels Group,
which is the tourism arm of the Aga Khan Fund for Economic Development (AKFED), an
international development agency.

TPS, Serena Hotels has expanded from 4 units in the
early 1970s to a collection of 25 luxury hotels, resorts, camps and safari lodges offering
quality accommodation in 6 Countries in Africa (Tanzania, Zanzibar, Kenya,
Mozambique, Uganda and Rwanda) and 10 properties in 3 Countries in Asia (Afghanistan,
Pakistan and Tajikistan). Serena Hotels established presence in Tanzania and Zanzibar in
1996 and expanded from 5 units to 10 units with properties located in Arusha, the
Northern Safari Circuit, the Southern Safari Circuit and now Dar es Salaam. Our
properties are located in some of the most exquisite and prime locations in East Africa and
Asia, which are strategically located to offer exciting circuits for our clients. With focus on
product, service standards and guest satisfaction, Serena Hotels continues in its quest to be
the hotel of choice for the discerning traveler.