Why Unit Trusts are better than Bank Savings Accounts

A guest post by @smartyannette 

We all desire to save and/or invest at some point in our lives but we fail to accumulate the little extra we have or we lack adequate financial know how to do so. Obviously, we are more likely to save if we have an investment goal and that's why I think Unit trusts are a much better deal compared to saving accounts in banks.

Unit trusts are professionally managed collective investment schemes where investors pool their money. The accumulated funds are then invested in a portfolio of assets (stocks, bonds, bills, etc.) and the individual investors gain in proportion of their investment, if the value of the underlying assets increases.

Common Unit trusts are Money Market funds that invests in short term securities like Treasury bills, Equity funds that invest in a variety of stocks, Bond funds for bonds and finally Balanced funds that combines all these asset classes. The money market funds are considered low-risk and tend to have lower minimum balances. The others are mainly long term investment options. Gains from Unit Trusts range from about 8% to 16% per annum based on level of risk. In comparison, Commercial banks offer about 4% per annum and only fixed deposit accounts compete favorably, with some over 10%.

You should probably choose Unit Trusts over savings accounts because the former offer better rates of return. Also, If you desire to invest in the securities market, but want to avoid the risk of investing in one company then you may consider Unit trusts as a safer and more stable option. Unit trusts also enable one to invest in a variety of securities at once and get periodic interest unlike some banks that only award interest at year end. 

Investment Banks are specialized unlike commercial banks and you are more likely to easily access financial information and advice as well as brokerage services from the former. The recently-ended Capital Markets Authority open day expo in Nairobi showcased a variety of firms that offer their customers the option to invest in Unit Trusts.  They Include Old Mutual, Genghis Capital, Stanbic Investments, Dyer and Blair investment bank, Britam, Apex Capital, Apollo and CIC. The minimum balances are as low as Kshs. 500 at Genghis Capital and Kshs. 100,000 (~$1,200) for some of the other firms.

Most firms give a capital guarantee, meaning that the principal you put in is secure, but it is always safe to check. Management fees and initial fees also vary depending on the type of fund, and while some companies charge it based on the interest earned, others may charge it on principal. Some firms also allow you to access your money upon request via MPesa while others require you to wait for 3 business days for payments to clear. In comparison, money in a savings account is only an ATM visit away so chances of misspending are high.

Base Titanium to be a model Kenya Mining Case?

Last week, Base Resources and Base Titanium had a session in Nairobi to update the media on the progress of their Kwale Mineral Sands project. CEO Tim Carstens, the Managing Director (who has made 50 trips to Kenya in 2 years) spoke about the progress developments that started in October 2011 and are now 83% complete with the plant expected to go live in the third quarter of the 2013 processing the extraction of three products used in industrial pigments, plastics, paper, and paint colouring.

So far, along with the three fields identified in Kwale, Base has a new dam filled with 6M cubic feet of water, a new 8KM road (from a nearby highway) to the plant - which is itself being assembled like a large pre-fab lego structure, a new dock being constructed at Kilindini (on the mainland side), and a (1,000 ton/hour) ship loader that is being assembled in Durban. In addition they have worked with KPLC to get stable electrical via a new substation, obtaining equipment for the site like the worlds' two largest bulldozers in – all while  maintaining an exceptionally safe work environment for the current 2,000 workers in a community that has not had past experience in mining.

Despite these investments which are expected to total $300 million for the project, the mine has a useful life of, and will be depleted, after just 13 years after which the company will hand the land back to the government, but now with plant, water dam, electricity, and road for it to to do other things. 

Base Titanium is a Kenyan company that  is subject to Kenyan laws, and will disclose every dollar they pay to the government as part of an international extractive industries initiative they have signed on for. Carstens believes that Base Titanium will demonstrate that large scale quality mining projects are possible in Kenya and that mining can replace coffee as the country's fourth largest export with approximately $2 billion in export revenue.

While many 
local communities typically associate the discovery of oil and minerals with instant wealth, Base has had to manage and communicate the expectations of the community in terms of  extending benefits such as employment opportunities (which will number about 1,000 during production), purchasing foodstuffs from the local area, and most important in payments. The proposed Kenya mining Bill specifies the sharing  of mining revenue with 75% going to the National Government, 20% to the county government, and 5% directly to the community which should alleviate some problems seen in Nigeria and Tanzania where locals don’t see benefits from the mines.

Carstens also said that Base Resources, which is listed in UK and Australia, is now 1% owned by Kenyan shareholders and they are continuing to talk to local fund managers on the potential for further investments in mining.

Tablet for Business Tales: Part I

How do you introduce someone who's watched the new world of tablets, launched with the first iPad, go by very rapidly and evolve into many stronger models three years later - and who does not believe in them? Very gently...! 

Despite the prevalence of iPads and other tablets at conferences, on the TV news, and even around Nairobi,  I still have not met anyone, other than @Wanyama, who uses a tablet productively as their main business device.

I recently got a generous offer to review the Samsung Galaxy Note 8.0 (Model GT-N5100) from Samsung Kenya after the recent 2013 Kenyan Blog Awards in which Samsung was a sponsor.  

The first order of business was to get a SIM card, and that was at Safaricom who also cut the card down to micro-SIM size with a special stapler. It's also very easy to switch the Note from Safaricom, to a Wi-Fi when you find a signal, and save on some money. I also bought a Micro SD card, but when it came to getting a hard shell/case for the Note that took a bit longer. I went to several shops, who all had a variety of 7" and 10" cases, and this is a new size in the market at 8" (the Note is aimed at Apple's new iPad mini), but eventually I found one at Fone Express.

Need to invest in larger Suit Jacket pockets

Another challenge was portability of the Note. It does not seem to fit in many jacket pockets, but larger pockets are something one should request from a tailor when ordering a suit in the future!

Tablet's are about apps, and there is a Google Play Store and a separate Samsung Store that I've not really tried. In the first month, from the Google one, I downloaded several apps I was familiar with such as:  

- Evernote (great when you take notes on different devices like laptop's or mobile phone and sync) and Adobe Reader

- Waze, Ma3Route and Ushahidi for Nairobi traffic updates

- Skype for communications

- The New York Times, Bloomberg, the Financial Times and the Wall Street Journal for news

- DSTV to see programming highlights

- Tried out several simple farming applications to track farm inputs and sales.

Road Bump: Swype is a nifty program that makes typing faster in touch screen devices. It costs $0.99 and I was able to buy it from the Google store (which also prices paid apps in Kenya Shillings) after I added my credit card details. However when I uploaded Swype, I found that I could not access the tablet as there was no keyboard to Swype/type in my access password on the top screen.

I spent a few days going back and forth with the Swype (online) and then Samsung (in Nairobi) teams without success and I had no choice but to go for the most radical option - which was to wipe out the tablet.  This seems to be a common issue in the tablet world in which people are constantly adding and deleting apps, some of which don't work properly, or compromise all devices. 

There were quite a few guides online and videos on YouTube  showing the simple commands to reset  it to factory mode - and fortunately it worked! Within a few minutes, the tablet was back to life, and once I got online, the previously downloaded apps were ready to re-install including Swype, which I've re-added, without incurring an additional charge.

So far the Note is growing on me. It's nice and easy to use for taking notes at meetings, where I previously used to carry around a laptop. With a hard case, and larger jackets, let's see where how far this can go.

Real Estate Moment: TJRC, Homes Expo, Bubbles or Boom

TJRC: Two weeks ago, Kenya's Truth Justice & Reconciliation Commission handed its completed TJRC Report to the President concluding three years of work in which the committee set out to document violations of human rights, abuse of power and misuse of public office since Independence and look at solutions that may be beyond the reach of the judicial system to addresses and restore.

They collected over 42,000 statements around the country and, at 41%, land and property issues topped their list of violations, far ahead of the next four issues (extra judicial killings, serious injury, persecution, torture) combined.

Homes Expo: The Homes Expo took place in Nairobi last week and some properties and exhibitors at the Expo included:

- AMS Properties has Five Star Gardens on Mombasa road with 2 and 3 BR apartments for  Kshs 5M and 7M respectively.

- Bluebell have 3BR apartments in Kileleshwa and Westlands for Kshs 18.5M and Kshs 24.5M  respectively

- The Cullinan will be full service apartments coming up next to Casabalanca in Kilimani/Yaya area and will have 1 bedroom apartments that range from Kshs 10M for 1 bedroom to Kshs 22M for 3BR ones

-  Imara Gardens on Mombasa Road have 2 and 3BR apartments at Kshs 6.8M and Kshs 7.8M respectively.

- Legacy Apartments being sold by Hass Consult are studio, 1 and 2 BR apartments on Naivasha road (minutes from the Junction Mall ) for Kshs 3.5M, 5M and 7.25M respectively ($85,300) 

- Peony Estate by Gao Yu comprise 100 homes with apartments that cost Kshs 17 million ($200,000) and Penthouses  for Kshs 30M in Lavington

- Victoria Villas are 4 BR houses in Kisumu for Kshs 10.5M

Other

- Diani Homes have properties in Mombasa, Lamu, and Diani

- The Kenya Ministry of Lands has constructed 600 3BR apartments in Kibera - Soweto East 

- Anza and Pam Golding Properties (with an app in the android store) enable property sellers to show 360 view of their properties online for interested buyers. This eliminates an inconvenience when showing a proprty that is currently occupied by tenants

- Also at the expo were supermarkets like Tuskys and Nakumatt offering home furnishings and other companies like LG who displayed their Kshs 1.8 million 3D TV 

Banks

Financiers at the expo included

- Barclays has a 15.9% fixed rate mortgage for the first three years and maximum mortgage durations of 20 years. So a Kshs 10M ($120,841) mortgage attracts repayments of Kshs 138,000 ($1,662) per month

- CBA has 25 year mortgages in shillings, US dollars, Euros and Sterling Pounds

- Co-Op Bank has good home mortgages that range between 12.75% to 14.75%

- Family Bank has mortgages as low as Kshs 1M ($12,048)

- I&M mortgages are at 16%

- KCB give mortgages of up to 25 years for home buyers, while those for investments are up to 20 years. Real estate developers get finance for up to 2 years with 85% finance and investment groups get up to 19 years with 80% financed - all with loan rates starting from 13.5% up

- National Housing Corporation has 13% to individuals   

Standard Chartered has 14.9% mortgages and finance properties up to Kshs 100M ($1.2 million) and these are also available to expatriates and non-residents –e.g. to own a holiday or investment home

Other Real Estate Blogs

- Contrarian Kenyan advises why you should invest in REIT's (Real Estate Investment Trusts) rather than in empty plots on the highway  as they offer better liquidity and diversity, but with less bureaucracy. 

- George Adulu  looks at common dilemma of many people who are paying rent in a house, but take mortgage land to build a home by borrowing to buy a plot of land to develop at some point in the future

- He also looks at the  buy to let  prospect of buying a property to rent out for income, but notes that, with the high interest rates, it only makes sense if you put down a sizable down payment, not the 10% that mortgage companies tease with. Also  if you are thinking about a property for purely rent income, then forget about the suburbs, instead head to densely populated parts of Nairobi and other urban centers. You will be shocked to know that hose single roomed units in those multi-storied buildings in Umoja, Dandora, Kayole, Embakasi and so on have a repayment period of less than 10 years.

Other Real Estate News

- Bad Debts : The construction, building and real estate sectors topped the list of sectors with biggest loan defaults in the first quarter of the year.

- Construction Jobs: The construction sector generated new jobs at the fastest pace in the five-year period to 2012. 

- Listed Property Company? Home Afrika plans to list on the Growth Enterprise Market Segment (GEMS) at the Nairobi Securities Exchange. The firm, with 128 shareholders, has projects under construction valued at over Kshs 12 billion such as Migaa (golf estate in Kiambu) Lakeview Heights (Kisumu), Llangwe (Kwale) and Kikwetu (Machakos) financed through shareholder funds and loans

- Succession:The Delamere Family is subdividing a Naivasha Estate as part of a succession plan involving grandsons of the settler farmer. 

- Unaffordable Homes: Owning a home in Kenya has become harder owing to the cost of finance. Still ccommercial banks had Kshs 122.2 billion ($1.5 billion) worth of home loans held in 19,177 accounts. (19,000 mortgages in Kenya)

EDIT

The Kenya Banker's Assocation CEO Chat series in May 2013  featured (PDF) Barclays Kenya CEO Jeremy Awori, and it focused on mortgages (PDF) 

Strathmore University has a course on Construction Project Management in June and another for Real Estate executives in July 2013.

Idea Exchange: CarnegieMellon, DABRA, PivotEast, ResearchGrants, TED, Apps

New, ongoing, and concluded opportunities

Africa App Quest is a search for Africa's top travel app in which developers will compete for a top prize $10,000 by building home-grown travel apps, specially designed for the tourism sector in Africa. It is sponsored by Visa and South African Tourism, the application rules are here, and the deadline (D/L) is 16 August. 

Airbus: Vote for the Team Aero Bamboo Engineering (Team A.B.E.) from the University of Nairobi,  in the  Fly Your Ideas contest where their project which engineers bamboo for aircraft cabin materials in competing against four other ideas shortlisted from 618 entries from 82 countries. Votes are open till June 3.

Art Moves Africa: AMA supports mobility of artists and cultural professionals within the African continent by paying for their costs of travel, visas and travel insurance. Performers in visual arts, music, cinema, literature and cultural advocacy are eligible, and the next deadline is 1 September for travel planned after 27 October.

For Carnegie Mellon University students interested in pursuing M.S. in Information Technology degrees in Rwanda, the Rwandan Government has scholarships for qualified students from the East African Community that cover 50% of the tuition fee and, for citizens of Rwanda there is an additional study loan to cover the remaining 50% of the tuition, plus living expenses if needed.

Connected Kenya: The Innovation Awards at the Connected Kenya Summit provide a platform to showcase Kenyan companies that are contributing to improving productivity and efficiency in the country through ICT innovation. For 2013, the awards are sponsored by Google and the deadline for applications is May 19 – apply here. 

Diageo: The Diageo Africa Business Reporting Awards 2013 a.k.a DABRA's finalists were announced this week and the short-listed pieces include stories like;

• Africa’s healthcare technology revolution
• Barry Bateman and Oscar Pistorius: Inside the Twitter explosion
• Ivory Coast’s Women Reject Equality in Household Law Debate
• Mozambique - Coal, gas: boom for all or just a few?
• Revisiting Tinapa
• Malawi: Beautiful Destination with limping tourism
• The Chinese loan conundrum: Who is benefitting from Zambia’s phantom growth in construction?

GAIN: The Global Alliance for Improved Nutrition invites public and private entrepreneurs to partner with to improve nutrition in Africa and selected innovations will receive business advice, technical assistance, and funding.

Google: Doodle 4 Google competition is open to students aged between 6 and 18 years to draw on themes of 'My Kenya' to celebrate Kenya's 50 years of independence. The winner will get ~$9,400 worth of school fees, as well as a similar amount as a technology equipment grant for his/her school and will have their doodle displayed on the Google Kenya homepage. An Android tablet device will be the prize for the teacher involved and D/L is June 14

GSK: Trust In Science Africa invites high quality African (Kenya, Tanzania, Uganda) medical researchers to submit proposals for collaboration and funding. The maximum grant duration is 3 years and the maximum amount of funding is $100,000 with a D/L of 31 May.

Kofi Annan Fellowship for outstanding students from developing countries provides the opportunity for 3 student from developing countries to study management at the European School of Management and Technology (ESMT) in Berlin and graduate with an MBA. The value of the fellowship is € 58,000, other details are here, and the D/L is 30 September. 

Nairobi Securities Exchange: The Investment Challenge 2013  is an online simulation of live trading targeting Kenyan youth who are in universities, technical institutions and other post secondary colleges in which where groups are given (virtual) capital to invest over 3 months to see who ends up with the highest value portfolio. Prizes may internships at NSE partner organizations.

Orange: The African Social Venture Prize promotes social innovations in support of development that use ICT. In addition to prize money ranging from €10,000 to €25,000, three winners will also receive support from professional entrepreneurs and ICT experts for a period of six months. D/L September 20.

Pivot East: The semifinalists in the 2013 Pivot East contest have been announced, and some of the selected apps include:

• ChamaPesa (gives investment groups a way to pool savings and invest in diverse instruments)
• Inforex (enables foreign exchange trading between Forex bureaus)
• EZsacco (allows savings societies to receive mobile payments, generate reports, and send members statements by SMS)
• Juakali (a service that links informal sector workers with potential clients)
• Smart Blackboard (gives students  1-on-1 interactive tutorials with real teachers, without the need for access to the internet)
• iDaktari (information management system for doctors with private practice)
• Kyatabu (a micro-leasing textbook subscription application)
• CancerBank (mobile app that makes for easier self diagnosis, early detection, triage and treatment of cancer)
• GreenHouse Pro (a  guide for green house farmers to cultivate six different crops)
• Ma3Route (crowd-sources up-to-date traffic & transport information)

TED: TED Prize is an annual $1 million prize that is awarded to an extraordinary individual with a creative and bold vision to spark global change. D/L 1 June.

Safaricom: AppWiz challenge targets new mobile application developers in Kenya with the aim of equipping participants with entrepreneurial & technological skills, to launch apps into the market that cover agriculture, health, financial inclusion, education games, utilities, safety etc. D/L 28 June.

Wellcome Trust: International Engagement Awards support health research projects with grants of up to £30,000, and is open to media professionals, educators, science communicators, health professionals and researchers in bioscience, health, bioethics and history. D/L 19 August.

EDIT

$1M Grant to Fund  Storytelling on African Issues will offer African journalists reporting grants to support investigative, multimedia and data-driven stories that aim to improve health and prosperity across the continent. The African Story Challenge is a project of the  African Media Initiative   (AMI), will award approximately 100 reporting grants for stories on development issues. Details here.

88mph is accepting applications for its next three month programme in Nairobi, Kenya, with investments of up to US$100,000 available - details here and D/L is July 15 

Africa Small Research Grant Competition: The Review of African Political Economy has an African Political Economy Research Grants competition for African scholars/activists based in Africa and pursuing a political economy agenda. D/L is 31 July and details are here.

Austrian Embassy in Nairobi has an Artist in Residence Programme 2014 that makes available 50 residencies in Vienna for the year 201 to artists, curators, writers, composers, art educators. More details here. 

BlackBerry Scholars Program aims to encourage women in Kenya (and the world) to enter and develop careers in the fields of science, technology, engineering and mathematics (STEM)and will provide scholarships to outstanding applicants who are seeking degrees at accredited local colleges and universities in the areas of STEM across Kenya. Application deadline is June 26 and more details are here

Ericsson Global Hack for Good is a chance for Kenyan mobile application developers to unite refugee families separated from each other by conflict, war and disaster. Details here

FIRE - Fund for Internet Research and Education (FIRE) Programme Awards aim to encourage innovation and find creative, accessible and acceptable solutions to Africa’s ICT challenges. Grant awards of up to $3,000 are available in categories of innovation on access provision, E-development, freedom of expression and a Community Choice Award category for the best social media campaign. D/L is 31 May and details are here. 

Georgetown University Master of Science in Foreign Service (MSFS) launches New Africa Scholarship as a full- tuition scholarship for a talented graduate student from sub-Saharan Africa. D/L is January 15, 2014 and details are  here .

German Media Development Awards: The People's Choice Award for human rights photography recognizes African photojournalists who inspire and change perceptions of life in Africa through the power of photographic storytelling. D/L is May 31

L’OREAL-UNESCO Regional Fellowships Women scientists who are nationals or permanent residents of any country in Sub-Saharan Africa can apply for the fellowships to assist them attain PhD degrees in all fields of science. Ten fellowships to the value of Euro 15,000 will be awarded. D/L is 30 June and details here. 

Scientists Without Borders and The Sackler Institute for Nutrition Science in collaboration with the Bill & Melinda Gates Foundation are offering $7,500 to the winning student in a dairy data management challenge. Details here.

TED:  Apply to be a TED Fellow 2014. D/L is June 21.

VC4Africa provides an opportunity for a select number of VC4Africa registered ventures to raise capital through the VC4Africa investor network - details  here and D/L is June 12 

Wordcamp Kenya is looking for speakers who are involved in digital marketing or bloggers in tourism to speak at the event in September 2013. Details here.