Could you tell us briefly the history of First Chartered Securities?
First Chartered Securities is essentially a privately owned investment holding company. It is relatively unique, and I stress relatively, because it is indigenously owned. There are a number of large holding companies in Kenya; most of them tend to be Asian family-owned groups that quite often are part of larger international Asian family groups. There are also indigenously owned Kenyan business groups, but again they tend to be largely family oriented. We do not have a large number of shareholders - just over 20 in fact - but even though there are one or two significant shareholders, we are, in a sense, independently run.
FCS dates back to 1974, when a group of Kenyan civil servants and business people got together and acquired the Insurance Company of East Africa (ICEA), an insurance company mainly involved in life and pensions business.
Its founder was Mr. Philip Ndegwa, a prominent individual with foresight. The business expanded, and by 1986, they had started up and acquired a number of other companies. Further expansion then followed with the acquisition of a number of business interests from the Inchcape Group in Kenya. This was a British group with businesses in East Africa and throughout the world.
We are now, in a sense, an investment group spread across insurance, banking agriculture and industry. We own 100% of ICEA, and subsequently acquired 80% of a general insurance company called Lion of Kenya, as well as interests in the insurance broking and re-insurance sectors. We also have a controlling stake in the National Industrial Credit Bank, which was originally owned by Barclays Bank. I used to be Barclays' Managing Director here, I retired in 1996 and then came back to Kenya as Managing Director of this group. We have investments in three tea estates and tea factories, as well as in beverage manufacturing businesses. Through our insurance companies we have a $ 100 million property portfolio, and a joint venture with Knight Frank, a large UK property management company. We were at one time heavily involved in ship agency and repair too - in fact we used to own the largest dry dock between Cairo and the Cape - but have now sold most of these interests.
We are actively looking for new investments, not only in Kenya but within the East Africa region, and not only on our own but in majority or minority partnership with other investors. We are fairly well positioned to support any investor coming in. If for instance, a US company is looking to invest in the region and wants a local partner who has funds to invest, a well established infrastructure to provide support at the board level, and expertise in certain areas, we feel that we can be a strong partner.
Finding good partners is itself a challenge. We have had a very low profile over the years. We do not publish a consolidated balance sheet. We are still a private investment group and for that reason, we do not shout from the rooftops. If we were a public investment group, we might have a slightly different profile, but in this market, we find that selective marketing of our name is the way forward.
Are you planning to invest in the same areas as you have in the past?
Not at all. We do not want to reduce our investment in the financial sector, but we would like to diversify our portfolio. We are looking at the healthcare and infrastructure provision sectors - both present good opportunities as well as formidable challenges. We would like to get involved in food processing, but this is also not easy to do at the moment. The economy is fairly depressed, and while there is a fair amount of re-investment, but you don't have a large number of companies coming into Kenya looking to invest locally. | There are some interesting acquisition opportunities, but availability management expertise is key. If you cannot go out and easily recruit management, it is far better to tie in with an organization that already has the needed expertise. We are also looking for opportunities here to support management buy-outs.
What would be the main reasons to come and invest in Kenya?
Firstly Kenya is a country where you can communicate throughout even though some roads have suffered severely in recent years, especially due to El Nino rains. Besides, the telecommunications sector is being privatized, as is the power sector. I would say that the infrastructure problems that we have had in the past few years due to the deterioration of some areas are being solved, so we are moving in the right direction.
Secondly we hope to see an improvement in the performance of the economy. On top of the impact of recession in the world economy, the purchasing power of ordinary people is very low due to the fact that climatic conditions over the past two years have not been that favorable. Interest rates have been extremely high due to the Government's internal debt. But now interest rates have come down to sensible levels, we expect to some stimulated activity. The opening up of trade in the region will also help.
Another attraction that Kenya has is the fact that it is an important economy in the African context. You have a large pool of skilled labour and skilled management, which other East African countries do not have. There are a large number of companies here, despite all the problems, and in spite of these, none of these companies are saying they are thinking of selling out. There must be something in here for them.
Obviously, corruption tends to put investors off. In South East Asia and South America, there is just as much corruption, but I must say they are a bit subtler. Here, it tends to be a little more open and, to be frank, that is another reason for finding a strong local partner. We do not get involved in corruption. I ran Barclays Bank here for seven years, one hundred offices, 4,500 employees. We made very good money and we did not get into corruption. You can run a business here without having to resort to corruption.
What is the process of selection of the companies that you acquire?
We have acquired a range of businesses. Since 1996 we've disposed of some of them and we have expanded others. We are now looking at the economy and seeing what other areas and sectors that we would like to be in - I have already mentioned food processing, healthcare and infrastructure projects. We also know what we do not want to be in. Tourism for instance, which thankfully is recovering but remains oversupplied. We are keeping an open mind on industry - there are particular niches which have possibilities. There is also potential in retailing and wholesaling.
Having selected sectors which offer the promise of long-term growth, both domestically and regionally, we apply certain minimum size and return criteria. And, as I mentioned before, we look for availability of management expertise. |
