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The ratification of the agreement will allow the Federal Express Corporation (FedEx) of the US which had expressed interest in starting cargo operations and establish a base in Kenya.

▪️ *Banks urged to review lending risk assessment*
Banks in East Africa are highly exposed to bad loans, especially in situations of extreme economic shocks, due to weak client risk assessment tools, a survey by Deloitte shows.The economic fallout of Covid-19 uncovered flawed risk assessment by the lenders amid pile-up of non-performing loans(NPLs).The consultancy firm urged banks to factor extreme economic shocks in the risk evaluation guidelines to reduce their exposure to bad loans.

▪️ *Unga Group eyes Sh284m from the sale of its assets*
Unga Group expects to get Sh284.5 million from the of its bakery business and part of its stakes in its animal feed subsidiaries. The company recently reached an agreement to sell Ennsvalley Bakery to BigCold besides signing deals to transfer part of the assets of Unga Farm Care and Unga Millers to joint ventures that the subsidiaries will own on a 50/50 basis with Nutreco International B.V.

*Today's Headlines*

▪️ *Fuel subsidy fund almost depleted*
The Treasury rejected a Sh5 billion request from the Petroleum Ministry to extend fuel subsidy beyond September, pushing petrol and diesel prices to a historic high.Treasury Principal Julius Muia told Parliament that it could not honour the request for the subsidy due to lack of cash in the kitty that had cushioned consumers from increased fuel prices from April to this month.

*Impact*
We expect to see further increase in October review unless the government decides to extend the fuel subsidy.

▪️ *CBK sees economy expanding by 6.1pc*
The Central Bank of Kenya (CBK) has projected the economy to grow by 6.1 percent this year and 5.6 per cent in 2022, backed by recovery in manufacturing, trade and hospitality sectors, and despite expected decline in agriculture production.CBK governor Patrick Njoroge said that economic indicators around the manufacturing, trade, accommodation and power consumption are pointing to improved economic performance, while there is also high optimism among banks and private sector players over the prospects for growth.He however said the impact of drought will dampen growth in the key agriculture sector, which grew at 5.4 per cent last year and is the biggest contributor to Kenya’s GDP at 23 per cent.

▪️ *South Africa, Nigeria trail Kenya cashless payments*
Kenyan businesses prefer cashless payments compared to those in South Africa and Nigeria, a new survey of women enterprises shows, highlighting the impact of digital platforms such as M-Pesa.A report by global digital payments solution provider, Visa, shows that an estimated 71 percent of businesses in Kenya use cash payments, while the preference for this mode by their customers stood at 22 percent.The survey shows higher use of cash by businesses in South Africa(91 percent) and Nigeria(94 percent).The less use of cash among Kenyan businesses is reflected in the high preference for mobile wallets (56 percent) compared to Nigeria (14 percent) and South Africa (7 percent).

▪️ *Shelter Afrique owners inject Sh2.5bn capital in six months*
The Democratic Republic of Congo (DRC) has ramped up its stake in pan-African housing financier Shelter Afrique, joining nine other member countries that have acquired extra shareholding with additional capital this year.
DRC has acquired an additional 0.94 percent stake with a $2.5 million (Sh275 million) capital injection, raising its shareholding to 1.68 percent from 0.74 percent.

*Impact*
This should lead to an expectation of a corporate bond at the Nairobi Securities Exchange.

▪️ *Uhuru orders review of Kenya Power contracts to cut bills by 33pc*
Kenya Power has four months to review all power purchase deals with independent producers, paving the way for a reduction in the cost of electricity by a third.Renegotiating the energy prices and other terms downwards by the end of December is one of the recommendations in a report presented to the President Uhuru Kenyatta on Wednesday.The electricity distributor has also been barred from finalising any un-concluded power purchase deal or renewing expiring contracts with the producers in the wake of a rise in power bills that hit a 38-month high in August.President Kenyatta appointed the taskforce in March after it emerged that Kenya Power had signed contracts committing it to take more electricity than it can sell. The flawed contracts have exposed Kenya Power to pay onerous capacity charges to energy producers even when their plants are idle.

*Impact:*
This is a positive development as it is likely to relief pressure from the current high costs of electricity for consumers.KPLC is likely to pass the benefit to consumers.

▪️ *KQ receives nod to fly past New York in US*
Parliament has backed a Cabinet decision to amend the air services agreement between Kenya and America that will see Kenya Airways expand its route network beyond New York.The pact will allow national airlines such as Kenya Airways to access US routes and the American carriers to access the Kenyan market.

*Today's Headlines*

▪️ *CBK pays Sh5.5bn dividend to State*
The Central Bank of Kenya (CBK) Monday announced that it has paid the Treasury a Sh5.5 billion dividend, boosting the government’s cash position as it seeks to plug a widening budget deficit.The funds are in addition to the Sh5 billion Treasury received seven months ago from the banking sector regulator’s cash reserves. This brings the total payout by CBK to Treasury this year to Sh10.5 billion and marks the CBK’s latest contribution to the government’s coffers.

▪️ *Mobile money agency transactions up 45pc*
Cash handled by mobile money agents in the eight months to August jumped by more than Sh1 trillion compared to a similar period last year, indicating a continued recovery for individuals and businesses from the pandemic-induced economic struggles.The latest data from the Central Bank of Kenya (CBK) show agent transactions in the period rose by 44.7 percent or Sh1.3 trillion to Sh4.44 trillion from Sh3.07 trillion in 2020.The number of times money was withdrawn or deposited increased by 20.8 percent or 244 million to 1.418 billion from 1.174 billion, indicating increased activity with the agents.The value of transactions was recorded to Sh2.87 trillion in the same period in 2019.

*Impact*
This is positive for Safaricom as it is likely to increase M-PESA revenues.

▪️ *Safaricom voice share falls as Airtel’s jumps to 29.7pc*
Safaricom’s share of voice market dropped in the period ended June, the first time in a year as its rival Airtel ate into its dominance.Data from the Communications Authority (CA) shows that Safaricom’s share of voice dropped 2.7 percentage points to 68.2 percent or 13.3 billion minutes in the three months to June.
Airtel grew its share by a 2.7 percentage points to 29.7 percent or 5.8 billion minutes in the three months ended June, the first time it has grown since December last year.

*Impact*
This is unlikely to affect investors view on Safaricom’s counter.

▪️ *Foreign investors pull Sh843m from Nairobi exchange*
Foreign investors made net sales on the Safaricom and EABL stocks at the Nairobi Securities Exchange (NSE) last week, pulling down the share prices of these stocks as well as the bourse’s market capitalisation.The net outflows on the foreign desk — which accounted for 45.5 percent of total market turnover — stood at Sh843.4 million last week, reversing the net inflows worth Sh211.4 million recorded the previous week.EABL led the market in net outflows at Sh509.6 million followed by Safaricom at Sh509.6 million. Due to the supply outstripping demand on these two counters, EABL’s share prices declined by 1.4 percent or Sh2.50 to Sh173.50, while Safaricom’s fell by 3.2 percent or Sh1.40 to close Friday at Sh41.80.They were the major contributors to the Sh77.1 billion contractions in investor wealth at the market to Sh2.77 trillion.

▪️ *Rising concerns on inflation ahead of MPC meeting*
The Central Bank of Kenya (CBK) will hold its Monetary Policy Meeting (MPC) today amid concerns about the rising cost of food that has driven inflation to an 18-month high.The prices of key food items have climbed significantly over the past couple of months, adding pressure on cash-starved households that are still reeling from the economic hit of the Covid-19 pandemic.Kenya’s inflation rose to a year and a half high in August largely on the back of increased cost of basic foodstuffs and fuel.

*Impact*
We are likely to see the CBK retain the CBR at 7.00 as inflation remains below CBK’s upper target of 7.5.

▪️ *KRA stopped from imposing new beer, fuel taxes*
The High Court has halted the plan by the Kenya Revenue Authority (KRA) to increase excise duty on at least 31 goods, including beer, fuel, bottled water and juice, from October 1 pending determination of a suit opposing the taxes.Justice James Makau Monday issued a temporary freeze on the KRA’s plan, saying that the case challenging the new taxes has a likelihood of success.Two people had petitioned the court to stop the impending decision by the taxman to increase excise

duty on the products by 4.97 percent in line with average annual inflation.

*Impact*
This is a temporary reprieve for Kenyans as it is likely to keep the prices at current level during the injunction.

▪️ *Exports hope as mangoes pass Italian safety test*
Kenya’s mangoes have received a clean bill of health in Italy in a major boost to growers as the country prepares to start exports to Europe after a 10-year ban due to fruit flies.Kenya Health Inspectorate Service (Kephis) said some tonnes of mangoes were sent to Italy on trial basis after the country corrected the issues that led to the ban and that Rome expressed its satisfaction with the fruits.The self-imposed ban saw Kenya rely on less lucrative middle-east market. However, with the presence of hot water treatment to contain the fruit flies, the lucrative European market is beckoning for farmers.

*Impact:*
The approval of the safety test is positive and likely to increase export earnings from mangoes. This also creates potential leeway for the exportation of fruits to European markets

▪️ *Safaricom seeks billions in smart water meter deal*
Safaricom is eyeing billions of shillings in annual revenues from installing smart metering systems for public water companies to help them cut leakages and theft.The State-controlled utility firms suffer from annual system losses, with an average of 47 percent of the water put into their distribution network not billed due to leakages, metering inaccuracies and theft.Safaricom is offering technology to track water use, leakages, theft and remote reading of meters in exchange for a share of the recovered revenues.Safaricom will build, operate and then transfer the smart grids to the water firms after an agreed period. It will make the initial investment required.

*Impact:*
The effort to diversify revenue is positive for the company and may improve investor sentiments. However, we do not expect this to affect the share price until the contracts are completed.

▪️ *Centum unit seeks to set up low-cost city houses in revenue drive*
Centum Real Estate is targeting homeowners and investors with Sh4 million one bedroom houses on Mombasa and Ngong roads, as the firm seeks to increase revenues following the decline in its half year profits.The subsidiary of Centum Investment Company is seeking joint venture (JV) agreements with land owners in construction of housing units along Mombasa Road and Ngong Road after Junction Mall.Under the agreement, the land owner will provide the land upfront as equity and form a special purpose vehicle for profit sharing.The firm has already inked a similar agreement with Crossnet Limited for construction of an apartment complex, pavilion, with 950 units in Ruaraka along Thika Road.

*Impact:*
Centum’s move to affordable housing is likely to be positive for the company as we could see an uptake in the property. We however do not expect this to affect the company’s share price

▪️ *Tea production declines by 26 million kilogrammes on bad weather*
Tea production in half-year to June declined by 26 million kilogrammes compared to the corresponding period last year on the back of unfavourable weather.The Tea Directorate said 274 million kilos of green leaf were delivered to factories between January and June , down from 300 million in a similar period of 2020.It attributed the decline in volumes to dry conditions and extremely cold weather that impacted negatively on the crop.However, there was an increase in export of made teas as traders released more stocks that they were holding to the market in the review period.