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Wednesday, January 30, 2008

Who actually owns Equity Bank? (Guest post)

Besides the fact that Transcentury holds a direct stake in Equity bank, it also holds a stake through Britak, which in turn has a large shareholding of Equity Bank.

Recently, Transcentury also bought the maximum stake allowable for one shareholder of a bank in Kenya (24.9%) though their holding in Helios EB Partners. Helios Partners is a foreign incorporated company that recently got new investors in the form of Transcentury and more than half the money invested by Transcentury ($300M = Ksh 19.5B) came in to increase the capital of Equity Bank (This amount was approx Ksh 11B). The Finance Minster decided to look the other side as this transaction happened right under his nose. He even gave this group the exception from any scrutiny of who the shareholders are for 9 years.

Essentially, we will never know who the investors are for 9 years in this bank. Why would the government official make an unprecedented decision to exclude them from a regulation to protect consumers in such a sensitive sector? The reason could be to be to hide the fact that the ‘foreign investment’ is actually local investors and the fact that the same local investors have violated the max. Shareholding rules for banks. Picture this…

• Maximum Shareholding allowable to a shareholder who is not an executive = 24.9%

• Equity bank holding through Britak = 10%

• Equity Bank holding as Transcentury directly = aprox 3+%

Clearly, Transcentury now holds more that 38% of Equity Bank! Proof of this available at http://www.transcentury.co.ke/transcentury/portfolio.asp

For the government officer involved… what was in it for him? For the government? Think of Equity bank chairman in London with PNU chaps openly campaigning for PNU and rubbishing ODM… do you start to get the picture?

Issue with Diversity at Equity Bank
We have established that the majority shareholder is Transcentury, now other issue is almost all senior managers of the bank are from one community. Over 85% of the employees in the bank are from the same community. The converse is that more than 50% of the banks customers are drawn from all the ethnic communities of this country. How do you support a company that does not promote diversity? There are multitudes of Private companies that do not promote diversity, but the duty for a listed company is to represent all Kenyans in its workforce and Equity is not exempted. If they exempt themselves, then we tell their customers so they can choose if that’s acceptable.

Business Model
Most people defending Equity bank never fail to mention that it has helped the poor and I support that, but this particular business model targeting the millions at the bottom of the pyramid is no longer unique to Equity Bank. We have leading financial institutions like Barclays, KCB following suit and doing it well with their deep pockets. KCB as a local bank and deserves our support, Barclays too because in as much as it’s about capitalism for its shareholders, they promote diversity internally in their recruiting.

IPO (Initial Public Offer)
Please note that Equity bank is the only listed company that got listed on the NSE without selling any new shares, so it wasn’t an initial public offer per se but a listing. The difference is it retains the exact shareholding when on the NSE as before with no dilution at all. These and only these shareholders were able to benefit with this listing, and later, the secondary buyers and sellers on the NSE. The best way to say this is they got credibility out of the listing without offering anything to the public.

Tell tale signs of the success of the Boycott:

• A day after word spread around on this, I had a chat with some staff members and one mentioned that they stopped 2 days ago paying cash against uncleared cheques even for a fee.
• Share starts the downward trend and will be a good sign that ODMs strategy is working.
• Few to no deposits in Equities branches in Western and Rift Valley. The first sign of a run on the bank and I am sure the CBK will come and rescue them by closing these branches due to the ethnic connections they have.
• Equity bank website www.equitybank.co.ke is now down. Reason? You and I can speculate that they have something to hide… I was looking for the IPO briefing document that listed the largest shareholders, but doubt you will find it again. I had to revert to an earlier download.

Eventually really, if they can balance the staff and hiring to represent the face of Kenya without bias, and I am sure they can find skilled talent from all ethnic communities, though they choose otherwise, then the boycott should be re-considered.

(Siasa Duni: Please publish this as a contribution article to Siasa Duni instead of as a comment. Hopefully this will provide a forum to justify the reasons why these institutions have been selected for the boycott and you can call on more articles on Brookside, Citti Hoppa etc)

Another suggestion on the boycott campaign is to brand it a “Kenyan Company Diversity” campaign to show that this is not about one community but ensuring a better Kenya for all)

-Mark

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