The Wise Shilling
@wiseshilling
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Business and Finance Insights • Data-Driven Stock Market Analysis • Unlocking Personal and Financial Growth • Passionately African • DMs open •
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Pinned Tweet
Again, we have an income problem and not a housing problem.
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Nigeria’s woes have been a culmination of 35+ years of policy mistakes.
Kenya should learn. Currency devaluation does not fix the economy. If anything, it breeds poverty more so in a net-importer nation.
GoK should focus on creating a conducive business environment.
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If you’re not careful in Kenya, you’ll hit 40 years old with nothing but beautiful pictures and memories of groove and liquor.
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If you’re above 25, these are the 7 must-have accounts:
1. Mobile money account
2. Bank account
3. Sacco account
4. Money Market Fund account
5. Broker CDS account for shares
6. CBK CDS for T-bills & bonds
7. Offshore brokerage account
What else can you add?
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Africa doesn't have global titans in any industry. But why is that the case? The short answer: it's not because of regulation, low per capita income or underdevelopment.
🧵A thread:
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On rent vs buying. Here’s a nostalgic post from a decade ago. Good points (ideally) but let’s be pragmatic:
1) The guy invested in a bond paying 13%. At the current rates, the bond is probably trading at KES 90 or less. Bond prices & rates have an inverse relationship.
🧵
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If you are considering putting your money in a money market fund, strongly consider a USD MMF. Especially if you earn in USD.
One reason the KES has been sliding against the USD is the high interest rates in the US. Rates rose from 0% in 2021 to 5.5% today. Next week, it is
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It took Kenya 46 years (from independence) to accumulate KES 1 TRILLION in debt. Nowadays we casually add a trillion in debt every year.
Good day folks.
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Instead of having your money stay idle in a bank account paying 7% interest, channel it into a business you understand.
A skilled marketer invested about KES 350k into an Airbnb and earns about 35k monthly (net). That’s 420k p.a (ROI of 120%). No investment will pay you that!
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Is Kenya’s economy growing, stagnating or declining? A look at the numbers:
(Bookmark this)
1) Real wage growth. The real wage index was at 81.4 in 2023 (June 2009=100). This means that workers’ purchasing power has declined.
Inflation has outpaced wage growth.
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Invest until you get to a point where dividends and interest earned from your investments cover your inflation-adjusted expenses consistently. That’s when you finally become financially free.
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A bigger shocker is even with the cheapest mortgage (9.5%), it’s still a trap. Take this example, lady took KES 8.5M 10-year mortgage to buy a 2B in Kilimani. She’s now paying KES 110K per month and earning 70k in rent.
Tough.
Investing in Real Estate in Kenya is overrated:
1. Rental yields on average are 6-8% p.a.
2. Estimated annual appreciation is estimated at 1-4% depending on location.
3. Occupancy levels aren't always 100%
4. Most rental properties are funded by expensive loans. Just look at
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The real solution to housing is affordable credit. At the lowest rate (9%), a Kenyan will pay 64k p.m and 10% down on a 8.5M mortgage. Total repaid over 25yrs is 19.3M.
Only 372k Kenyans earn over 100k (formal sector).
Make mortgages affordable and the market will fix the rest.
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Everyone is advising you to buy bonds but let’s do the math:
Upfront investment is ~2.4M. If you’re doing Nrb-Thika, you get ~8k a day or 240k a month.
After loan repayment (~13% p.a) you’ll have 119k p.m GROSS. Even if you net 50% of that, ROI is 30%, bonds do 18% max.
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Mambo ya supermetro. Financial people hii investment Iko worth it ? Ama ni mchezo wa taon 👀
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A detailed intro to unit trusts (You’ll want to bookmark this):
There are 5 major types of unit trusts in Kenya.
- Money market funds
- Bond funds
- Equity funds
- Balanced funds
- Real Estate Investment Trusts
1) Money market funds (MMFs) are the most common type of unit
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Why KenGen should be on your radar as an NSE investor:
🔷 Improving profitability. FY23 PBT was up 38% to KES 8.53B.
🔷 Highly undervalued stock with a dividend yield of 15%.
🔷 Market share of 66% in a young and developing nation (energy demand).
🔷 GoK’s plan to divest.
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Invest until you get to a point where dividends and interest earned from your investments cover your inflation-adjusted expenses consistently. That’s when you finally become financially free.
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RIP Charlie Munger, one of the most remarkable & resilient human beings. He went from broke & divorced in his 30s to a renown investor.
Here’s my favorite quote from Charlie: "Assume life will be really tough, and then ask if you can handle it. If the answer is yes, you’ve won."
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If you want to know how the Kenyan economy is doing, look at this chart: the Banking Sector Non-Performing Loans Ratio.
The steady rise tells you that more people and biz are unable to pay their loans.
This is highest it has ever been (worse than 2007). Times are not good.
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Kenya’s export earnings dropped in 2023 despite the KES shedding over 25% of its value. Ideally a weaker KES should prop up exports. But this didn’t happen. Why?
1) Our exports are primary demand inelastic commodities. When tea prices drop doesn’t mean you drink more.
1/5 🧵
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If you’re young, avoid getting tied down too early with too many unnecessary responsibilities.
Car loans, subscriptions, and credit card bills lock you into servitude.
Use the freedom of your 20s to your advantage rather than upgrading your lifestyle too soon.
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An acquaintance turning 38 this year has lost his job today. The guy worked for an NGO but a mixture of toxic habits and friends led to this. With car loans (Prado & CX5) and a mortgage, the guy is now stuck. He’s asked me to help him negotiate his loans. How sad! Don’t be him.
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Kenya’s mining sector:
Like many other African countries, Kenya has natural resources. Kenya’s main export (mineral) is Titanium Ore. It accounts for 65% of all mineral output value. It is also our largest export to China.
Kenya’s titanium mine is operated by Base Titanium
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The older you get, the more you realize that everyone is just winging it.
No one has their life completely figured out. Even the people who look like they do.
It’s okay to be stuck and not know what you’re doing. It’s a sign of growth.
Happy new month. Keep seeking growth.
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Don’t introduce yourself to a lifestyle you can’t afford.
Debt will burden you. Debt collectors will humiliate you. Auctioneers will profit from you.
@cheruiyotkb
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There are four broad factors affecting Kenya’s money supply:
1) Banks are the creators of new money through credit expansion. Banks’ net loans have been reducing. This shrinks money supply.
2) CBK has been borrowing heavily (OMOs) while hiking rates (tightening).
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Someone told me this past weekend that money is not circulating as usual and businesses are really feeling the pinch. There's nothing like economic growth if small businesses can't even survive in this country.
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We don't realise that the highest tax we pay is inflation tax. If we earn 14% on an investment and if inflation is 7%, we pay 50% as inflation tax on our income. Since we always focus on nominal numbers, we don't realise the enormity of this. This is also known as money illusion.
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In mid-October, James Mwangi told Bloomberg that Kenyans’ disposable income was being pinched hard.
Today, we see that Equity Bank Kenya net profit fell 20% to KES 19.3 billion.
For the first time, the value of mobile money transactions in the first 8 months of 2023 fell 2.79%
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@GladysShollei
Yes, we cannot control the price of oil but we can control our taxes.
Taxes are a national not a global issue.
37.5% of the cost of petrol is taxes. That is within our control.
H/t:
@ephraimnjegafan
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@moneyacademyKE
Should we tell him that PayPal has been integrated with M-PESA for more than 4 years?
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So he understood the issues all along and chose not to act?
Wasn’t he the one threatening parliament with CDF cuts if the finance bill 2024 didn’t pass?
Exiting Treasury CS offered notes on some issues affecting the country:
—Highlighted the presence of ghost workers and pensioners as a significant issue, calling for their identification and removal to cut unnecessary costs. Has urged for the government payroll to be linked to
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A lion and a rhino are about to fight.
The lion tells the rhino, take off your horn, so that we can have a fair fight since I don’t have a horn.
The rhino foolishly agrees.
Fight begins and he gets torn to shreds by the lion because the lion used his teeth and claws.
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🔷 What is a sukuk bond?
It’s an Islamic shariah-compliant bond. Like other bonds, they are a source of (passive) income.
🔷 How do they work?
Sukuk bonds comply with Islamic principles and are structured based on asset ownership and profit sharing. Basically, the bonds give
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The Kenyan shilling is among the currencies that have lost the most value since January 1, 2022.
Over that period, the KES lost close to a quarter of its value. This year alone, the KES is down ~18%.
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Never fall in love with your investments.
People have lost a lot of wealth holding on to a business or an asset they should’ve discarded years ago.
Attachment is the root of all suffering.
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Chinese bamboo tree:
- Needs daily water.
- Needs constant fertilisation.
Year 1: nothing
Year 2: nothing
Year 3: nothing
Year 4: barely anything
Year 5: grows 80ft tall in just 6 weeks
Lesson: sometimes change happens gradually then suddenly. Hold on.
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This is the year to scale higher financially.
If you’re looking for remote jobs that pay in USD:
- Writing
- Graphic Design
- IT & Programming
- Administration and Customer Services
And more, go here:
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If you’re above 25, these are the 7 must-have accounts:
1. Mobile money account
2. Bank account
3. Sacco account
4. Money Market Fund account
5. Broker CDS account for shares
6. CBK CDS for T-bills & bonds
7. Offshore brokerage account
What else can you add?
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3 Business and Personal Finance lessons from billionaire Mohammed Dewji MO, Eastern and Central Africa’s richest man:
1. Save with a goal with in mind. Stack your money slowly with a plan and discipline. If you’re aspiring to become an entrepreneur, start saving today with the
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7 Best documentaries for the weekend:
1) Asian Financial Crisis (DW)
How massive debt and rapid currency devaluation led to the worst economic disaster in Asia.
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DTB is the most undervalued bank stock on the NSE:
It has a book value of KES 267 and is trading at KES 45.55 (P/B: 0.17).
H1’24 PAT by 11.5% to KES 4.9B (P/E: 1.85) while div yield is 13% (2023).
However, its Achilles heel is it’s ROE of ~10%. Average bank ROE is 22.5%.
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Did the President just admit that Kenya cannot create employment?
One key growth driver during the early Kibaki-era was the low cost of credit. If GoK borrows cheaply, and the KES is stable, banks will lend.
For context, Vietnam which is making reforms, is borrowing at 2.7%.
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The damning mistake most young people make?
Locking away the first KES 1m in a savings account. Your first million should be used to increase your earning capacity.
That savings account will NEVER make you wealthy. Build capacity. Take calculated risk.
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By age 30, your circle of friends should talk about stocks, real estate, and money.
Who you surround yourself with determines your future.
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Dear GoK, striking a balance between taxation and economic growth requires careful consideration and a comprehensive approach. You can employ several strategies to achieve this delicate equilibrium:
1. Fix Government Spending: Effective tax policies must be accompanied by
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Most of the frustrations people have later in life come from living their lives based on the rules others set for them.
Decisions like buying a home/land, marriage and children should be your own. These are huge personal and financial decisions.
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Safaricom is trading at levels last seen in 2014. Why is this happening?
A keen look:
1) Uncertainty - The Ethiopian entry is bittersweet. While the market is huge (pop: 126m+), inflation (28%), currency controls, domestic unrest and low ARPU have investors rattled.
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Who you marry will either make or break you.
• Marry someone who understands money and isn’t extravagant.
• Marry someone you can openly talk to about money and investments.
• Marry a teammate not a soulmate. If you can get both in one person, you’re lucky!
@cheruiyotkb
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Under-appreciated wealth hacks:
▪️Avoid bad debt
▪️Find your “enough”
▪️Invest consistently
▪️Avoid lifestyle creep
▪️Keep the same spouse
▪️Spend less than you earn
▪️Buy cash generating assets
It doesn’t have to be complicated. Discipline is the key.
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We don't realise that the highest tax we pay is inflation tax. If we earn 14% on an investment and if inflation is 7%, we pay 50% as inflation tax on our income. Since we always focus on nominal numbers, we don't realise the enormity of this. This is also known as money illusion.
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Our debt is a ticking time bomb. The Moody’s rating downgrade to Caa1 is just the beginning.
Our external debt redemptions more than double next year. Don’t even mention domestic debt.
NPLs are at 16% and we’re not in a recession. That tells you about the business environment.
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There is a direct relationship between your finances and your health. When you’re in control of your finances, you tend to experience less stress, feel more confident, and sleep better. This December create a financial plan that suits your goals. Be wealthier and healthier.
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If you’re young, avoid getting tied down too early with too many unnecessary responsibilities.
Car loans, subscriptions, and credit card bills lock you into servitude.
Use the freedom of your 20s to your advantage rather than upgrading your lifestyle too soon.
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If you are looking to transform your finances in 2024, upgrade your money game by furnishing your timeline with the following accounts:
Personal finance -
@cheruiyotkb
Money matters -
@wiseshilling
Microeconomics -
@MihrThakar
Financial literacy -
@TheAbojani
Business matters -
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Something every business person must learn:
You don't get paid for effort, hard work, or passion. You get paid when you solve people’s problems.
Know that and know peace.
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50% gain on KES 1,000: KES 500
10% gain on KES 100,000: KES 10,000
In the beginning, focus on saving & investing more, not on maximizing your return.
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Consistency is the key to long term wealth creation. Be patient, invest relentlessly and avoid disasters. Investing is not about being the smartest or designing complicated models but rather about making good decisions spread over time.
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Note for 2024:
Never upgrade your lifestyle in anticipation of an increase in income. Upgrade only when the increase becomes certain. To maintain balance between present and future, half of your increment can be spent and other half needs to be invested.
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Once again, we have an income problem and not a housing problem.
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NCBA April 2024 stock picks:
The bank places a buy rating on HF, CIC, Jubilee, BAT and Safaricom.
“Buy rating” means the bank forecasts the stock will deliver returns of 20% or more in the next 12 months.
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Non-withdrawable sacco deposits to be taxed starting this year. GoK aims to increase the tax progressively from 0.10% in 2024 to 0.15% in 2027.
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The biggest fallacy that many people have normalized: education is not important.
Just because you see a few dimwits in government doesn’t mean that’s how it is for all academic dwarfs.
US data shows that 88% of millionaires are graduates and 52% hold atleast a masters degree.
Where did Index 1s in our highschool go to? Tom Musembi questions...weeeh where are we headed as a generation
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The greater fool theory:
One big reason people invest is to exit at a better price and book a favorable return. This hope and expectation of a higher price eventually creates a bubble. But no bubble can run up forever. Two things must happen:
1) The bubble bursts: remember the
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Kenya is not among the fastest growing economies. But guess who is? Tanzania. She is ranked number 15 and is projected to grow 6.1% in 2024. As a matter of fact, business sentiment is bullish Tanzania more than Kenya.
Also in the list is Ethiopia (6.2%) and Rwanda (7%).
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The truth is that most of the houses and cars are owned by banks. People work for banks to pay their loans and additionally work for the government just to pay taxes. A never-ending doom loop.
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My grandpa once told me "if you get on the wrong bus, get off at the nearest stop, the longer it takes you to get off, the more expensive the return trip will be."
He wasn’t talking about buses.
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@TuJadili
@moneyacademyKE
One thing you must know is that BRICs is not interested in creating a reserve currency (RC). China, the giant of BRICS, runs capital controls and strictly regulates its currency, the yuan. That’s not about to change.
The USD will reign longer than people think.
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If you can separate emotions from decision-making, you're immune to manipulation.
Know your triggers.
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Saving and investing are sacrifices we must make for our future selves. They are hard decisions that eventually guarantee us a peaceful retirement.
On the flip side, it’s easy to overspend and ignore our finances until we can’t. But by then, life is already tough. Choose wisely.
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The current NSE described by two quotes from great investors:
“A down market lets you buy more shares in great companies at favourable prices.” - Shelby Davis
“Buy when others are fearful and sell when they are greedy” - Warren Buffett
Buy great companies at great prices.
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Africa’s largest economies by GDP (2024):
1) Egypt - $475.3B
2) South Africa - $373B
3) Algeria - $266.8B
4) Nigeria - $252.7B
5) Ethiopia - $205.1B
6) Morocco -$152.4B
7) Kenya -$104B
Nigeria has lost ~46% of its GDP while Kenya is no longer in Africa’s “Big 5”.
Source: IMF
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Over the past 2 weeks I’ve been less active on Twitter/X. My wife and I welcomed our first child. Despite my best efforts, she refused to name her “Wise Shilling”. But we’ll try the next one.
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Shock as Hermes founder, Nicolas Puech cuts ties with family and plans to leave half of $11 billion fortune to gardener.
Lesson: if your financial plan depends on your parents or children, rethink it.
Make this the year when you take charge of your finances.
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You will never be ready. People start where they are and with what they have.
The sooner you understand this the sooner your life will improve.
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Things every person should know:
1. Salary won’t make you rich
2. Inflation will devalue your money if you don’t invest it well
3. Multiple streams of income are a necessity
4. Budget your money and follow that budget
5. Compound interest is magic
6. Buy assets
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If you’re looking to build wealth, ensure that this is your hierarchy of expenditure:
1st - Needs
2nd - Investments
3rd - Wants
Don’t put your wants before your investments.
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The goal is to make more money than you need, spend much less than you make, and carefully manage the difference to make more money for yourself.
Having a surplus after taking care of your needs and wants makes life easier. You’ll live a more fulfilling, and happier life.
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@MihrThakar
If Kenya’s economy wasn’t this highly digitized, we’d already have 2k and 5k notes. The increase in M-pesa transaction limits reflects the deplorable state if the KES.
KES 1000 from 2013 is now worth 500. And that’s from using the official inflation rate.
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Control your destiny.
Bank won't lend you money? Pay cash, hire purchase or join a Sacco.
Not getting paid the money you deserve? Start your own business.
Didn’t get invited to the party? Host your own.
It's your future. Nobody owes you anything.
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Why exports are not booming despite the weak shilling:
In the 12 months to August 2023, the Kenyan shilling lost ~20%. In the same period, exports increased by a meager 0.5%.
You’d expect exports to boom as the KES weakened. But that has not happened. Why? Kenya has a very high
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Never sell your investments too early.
SoftBank sold its entire 4.9% stake in Nvidia for $3.3B in January 2019. At current prices that stake is worth over $90B!
Get gut-crushing conviction and hold for as long as possible. Time is the distinguishing element.
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Kenya’s per capita disposable income ($213) is below Africa’s average ($2500). The causes:
- High interest rates
- High taxes
- Weaker KES (lower purchasing power)
- Low productivity
- Sustained high inflation
This leads to:
- Slow economic growth
- Unemployment
- Social unrest
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Banks and consumer goods companies love the middle class. Here’s why:
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@kahome_steve
The real estate companies are the money makers. I know of one famous company that bought land in Konza for peanuts, they sold it over 3 years, for 500k to 800k (1/8 acre). Minted so much cash they bought a building in Westlands. Owners of the company didn’t invest in Konza.
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One good NSE-listed stock that’s not well covered is Carbacid Investments Limited.
A thread:
1) The company which deals in the production, processing & marketing of carbon dioxide has consistently grown its revenues & profits.
FY22:
Revenue: +56% to 1.4B
PAT: +70% to 707M
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Serious money conversations we should be having:
✅ How to create sustainable and scalable sources of income.
✅ How to build a legacy of wealth that can be passed on to posterity.
✅ How to educate children to be responsible with wealth creation and management.
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Imagine destroying your prime mental and physical health for a company that can terminate you instantly to save some cents on the shilling.
Corporations are tools, not safety nets. Their primary aim is to maximize shareholder wealth, not yours.
Build your financial life.
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You are a high income person in tech or any field and you have no savings, start now.
To the creatives and freelancers, manage your earnings. Your income is inconsistent and can vanish.
Invest that income. If Michael Jackson went broke, then trust me, income is not wealth.
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Dissecting KCB’s issues: Is it a buy?
1) Non Performing Loans
NPL ratio ticked down 4.1% from 21.5% to 17.4%. This is a step in the right direction but still above the industry averages. Paul Russo
@Saagite
attributed it to legacy debt which he is tackling. The drop is evidence.
— KCB trading at levels last seen in 2012.
Time to buy or is it a value trap?
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When the slums flooded, affordable housing was touted as the solution.
Now that Runda is also flooded, is affordable housing still the solution?
Flooding in Runda, one of Nairobi's most expensive neighborhoods.
Our live report on CNN as heavy rainfall continues pounding Kenya
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This is Africa's exclusive club of USD billionaires.
They’re worth $82B together and they made their fortunes in 'traditional' sectors: cement, telecoms, sugar, oil, mining, banking etc.
How will the next generation make theirs?
One big bet is healthcare. Your views?
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Upgrade your skills this year. There are various platforms and YouTube channels you can use. Here’s a few of them:
1. Khan Academy
2. Coursera
3. Udemy
4. Traversy Media
5. freeCodeCamp
6. Academind
7. The Net Ninja
8. CS Dojo
9. Programming with Mosh
10. Fiverr Learn
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14 interesting takeaways on business, personal finance and development from billionaire businessman Jimi Wanjigi (You’ll want to bookmark these insights):
1) Africa is the next frontier. In this decade, more African countries are embracing intra-African trade and the new breed
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3/
- There isn't a single market, there are 54 of them. And it's harder for innovators to scale when you need to deal with 54 cultures, 54 administrations, 41 currencies and 38 official languages.
As for AfCFTA, the progress is slow, non-cohesive and bureaucratic.
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How big is fraud in Kenya?
Cybersecurity firm, Evina deduces that 51% of mobile money transactions are fraudulent.
Mind you, M-Pesa transactions are equivalent to 56% of GDP (CBK).
This means that mobile money fraud (alone) is equivalent to 28% of GDP. How big is fraud?
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5 areas everyone should improve on in 2024:
1. Read more books and courses
2. Undertake strategic networking
3. Start investing and pursue financial literacy
4. Prioritize physical fitness and healthy living
5. Undertake deliberate and conscious goal setting
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Wealthy people pay much less in taxes. Why? Their incomes are predominantly derived from assets not labour.
In Kenya, dividends are taxed at 5% (residents), IFBs are tax-free and the rental income tax rate is 7.5%.
N/B: Employees pay up to 35% in taxes.
Invest in assets.
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When saving, consider the time value of money.
Banks paying interest rates that are lower than the inflation rate (5% as of April 2024) are robbing you in broad daylight.
Instead, choose money market funds and SACCOs paying above-inflation rates.
Protect your savings.
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