Jan Schalkwijk is a Portfolio Manager with Africa Capital Group, an asset management firm that specializes in African stocks. The following is an account of his recent trip to Kenya and Burundi.
As the plane began its descent into Nairobi the evening of March 5th, I struck up a conversation with the KLM flight attendant. I always enjoy the opportunity to speak a little Dutch, which is not a daily occurrence for me these days.
As part of the usual small talk, I asked her where in Nairobi the flight crew was staying. She replied that KLM security had advised them to stay at the airport this time in light of security concerns surrounding the elections that had been held the day prior.
It was then that I mentally connected the news articles I had been reading about the Kenyan elections with the reality of being there, at ground zero of what could either be a repeat of the 2007 election violence or something more hopeful: a watershed moment for Kenya — a peaceful transition of power.
Was I foolish or naive to be here at this moment? Perhaps. Yet, I felt a strong desire to be in Kenya now, not later, to get an on-the-ground sense of the forces of change, the reactionary headwinds, the energy of the economy, and the level of optimism of the Kenyan people.
Yes, I was glad to be in Kenya.
An Uncharacteristically Quiet Nairobi
Once I had identified my driver, we were off to Nairobi. In a city usually consumed by grueling traffic jams into the late hours of the night, I was struck by how quiet it was. In fact, I was wishing it was a little busier, so my driver would have to slow down a bit and tone down the joyride experience.
He was equally surprised, and said he had never seen it this quiet. Because of the elections people had left town in great numbers, to vote in the towns and villages from where they had migrated, or just to be in the safe confines of their communities of origin. Of those who remained in Nairobi, many had taken time off from work to see what the next few days would hold.
We arrived in New Muthaiga, a wooded, residential neighborhood west of town, sprinkled with embassies, and the home base for UN personnel, with their SUVs and red license plates. I had booked a stay in a private residence I had found through AirBnB.com, which I use frequently when abroad. Besides the obvious benefit of saving 75% off the price of a nice hotel room, I like to travel in this manner, as it affords me the opportunity to share meals with my hosts and to see the region from the local perspective.
Open for Business
Once day broke I was eager to tackle the assignment at hand: to visit a number of publicly traded Kenyan companies and to get a sense of the economy and the way forward post-election.
The broker that was taking me around to meet with the various companies was Kestrel Capital. Though most brokers can deliver a meeting or two, the quality and number of meetings they were able to arrange and their hospitality made a very good impression.
Furthermore, traffic was still light and continued to be so for the remainder of the week, making the otherwise taxing effort of shuttling between meetings a breeze. The only hassle was the increased security, which I was told has been in place ever since the Kenyan army entered Somalia.
Despite the stepped up security presence, it didn’t feel tense, and the security guards were generally friendly and not too worried to see me show up at their gates. So once I was re-adjusted to the sight of AK-47s – ubiquitous throughout much of Africa – and proficient with the procedure of taking out my laptop and recording the serial number on the sign-in sheet, it was business as usual.
Investors Welcome
Over the course of the next seven days, I met with a number of companies in industries ranging from telecom, banking, and infrastructure, to private equity and media. The meetings were always with senior management and always lasted until I started feeling guilty that 60 to 90 minutes had passed and no one had given any indication that the meeting needed to be wrapped up.
As I sat down with the CFO of Safaricom (SAFCOM:KN) for an hour plus, I realized how hard it would be to pull something similar off in New York with the CFO of Verizon (VZ:US). Any perceived informational disadvantage in the analysis of companies traded in Africa versus those in a mature and data rich markets like the US is mitigated by the access one gets to senior management, their willingness to talk to you, and generally the less complicated nature of their businesses.
An Anxious Wait for an Election Outcome
As the days passed, people were getting more anxious about the pending election results. Why was it taking so long? Why did the electronic vote counting break down? Television screens in office buildings, shops, and restaurants were all tuned to continuous election coverage.
As I left for Burundi to visit my sister the Friday after Monday’s elections, the results still had not been declared. Watching the TV screens at the airport, it appeared that Uhuru Kenyatta, the son of Jomo Kenyatta, Kenya’s first elected president, seemed to have a slight margin over 50%, the share needed to avoid a run-off.
As the district results came in, it was hard to avoid noticing that in each district one candidate generally had 90-99% of the vote. That would suggest that Kenyans are still very much divided along ethnic lines and not voting based on issues. Hopefully the new constitution and the increased direct participation, will gradually lead politicians to substitute the politics of ideas and results for the politics of ethnicity.
Grounds for Optimism in Burundi
Whereas Kenya was humming with economic activity and building upward and outward, Burundi is more reminiscent of the Africa that is familiar from the Western media: poor, agrarian, and little infrastructure. One has to be careful for mosquitoes and food-borne illnesses, and running water and electricity are both a luxury and unreliable. But even here, one would be hard pressed to not see the optimism, the desire to create a better life.
The growing capital city, Bujumbura, boasts breathtaking views of Lake Tanganyika with the mountains of DR Congo as a backdrop, and lush hillsides and tea plantations just outside of the city. The economy feels like an NGO driven one, with every place we visited teeming with expats.
But at the same time, billboards with cellphone advertisements, banks, and restaurants are sprouting up left and right. The future holds great promise. It was during a car ride back from the cool mountain tops to the capital that I learned on Radio France Internationale that Kenyatta had been declared the winner in the Kenya elections.
Post-Election Kenya Gets Back to Work
Once back in Kenya, Nairobi seemed to be at peace with the election results and eager to move on. The people I spoke to, granted they were likely Kenyatta supporters, felt that the Supreme Court challenge by his main rival Raila Odinga would run its course but was doomed to fail and that Kenya was ready to move on.
Whether the post-election era of Kenya is the dawn of a new era or a consolidation of power, time will tell. I could, however, empathize with the desire to move on and to not dwell on 2007 and the ghosts from years past.
I was also fortunate to get a chance to visit East Nairobi, which is usually not where the brokers will take you. I felt like I had been miniaturized and dropped off near a giant anthill. The scene was utterly chaotic, full of energy, and everyone was laboring at something. Welding pipes together, making a bed frame, selling building blocks, transporting car parts in a wheelbarrow, an endless road, with endless activity.
I met a local businessman there who runs a factory that makes personal care products such as disinfectants, creams, hand sanitizers, etc. It was nothing like I had in mind. In a vacant lot next to the building, a pig was sorting through heaps of garbage. As we descended into the basement where the factory was, a small team of workers was mixing, bottling, and labeling some sanitary product for shipment. In spite of the gritty surroundings, the bottles looked immaculate and my host was enthusiastically showing me around and sharing his vision for growth.
The East Nairobi that I saw is the economy that hardly shows up in the official GDP tallies, that is not accounted for in the 40% unemployment number, but that definitely generates income, buys cellphones, real estate, food products, etc. One would be mistaken to assume the official economy is the sum total of Kenya’s economic activity. In fact, the East side feels rather powerful in that regard.
A Farewell Safari
With some time to spare on my last day, I paid a visit to the National Park. I imagine decades ago the city and the park were some distance from each other, but today, the city reaches to its gates. It makes for the interesting experience of seeing wildlife against the backdrop of a city skyline. No need to sign up for a safari; just ask your driver to take you there and drive into the park and if you have a hard time finding the animals, just follow the Jeeps from Kenya Wildlife Services (KWS).
The wildlife is best spotted at dawn and dusk. I was there in the middle of the day, yet was fortunate to spot plenty of giraffe, buffalo, gazelle, and even a hippo that surged out of a swampy body of water, just as I was contemplating getting out of the car (I subsequently changed my mind). My driver – I would guess in his mid-fifties – had never been inside the park, which struck me as odd and was the topic of some friendly laughter and joking around, during our drive.
As I thought more about it later, I realized that on a trip to Long Island years ago, I was stunned to learn during a business lunch that half my table had not been to New York City in over a year and some had never visited the Empire State building. Perhaps we are not that different after all.
[Jan Schalkwijk is a Portfolio Manager at Africa Capital Group.]