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Kenya's Eurobond - What is trending FACTs or FICTION

The government of Kenya received $2 billion (KES 175.1 billion) in its account with the Central Bank of Kenya after it completed the process of acquiring two loans from international markets through the Irish Stock Exchange. One loan was for $1.5 billion (KES 131.3 Billion) to be serviced for a period of 10 years and the other was for $500 million (KES 43.8 Billion) to be served for a period of five years. In simple terms, the government essentially asked investors to lend $2 billion on the promise that it will pay back in five and ten years with interest. The government, through the central bank gave these investors a piece of paper known as a bond and in exchange central bank of Kenya collected on the GOvernments behalf $2 Billion cash in the form of a loan.

Potential Benefits - In simple terms

  1. ​Infrastructure development - railway, ports, water and energy to ensure steady economic growth, poverty reduction, creating employment opportunities
  2. Reduced Interest Rates to the local market - The high domestic borrowing by government entities e.g. National Treasury to finance budget deficits increases competition for funds and drives up interest rates. If Treasury borrows elsewhere, then there will be pressure from the banks to look elsewhere to sell loans making the supply higher than the demand and the interests rates go down.
  3. Loan Payments / Debt Reduction - Funds from the proceeds may be used to reduce/pay-off some syndicated loans that were contracted at higher interest rates as compared to the Euro-bond with lower coupon rates and longer maturities and thus helping the country better manage its foreign debts and in result improving the credit rating of the country.

Potential Risks - In simple terms

  1. ​The benefits anticipated from borrowing any loan, depends highly on how the loan is used and managed. Similarly, the benefits highlighted above, highly depended on how the government would use and manage proceeds from the eurobond. The probable risk is if the proceeds are being used to pay for un-accounted items. If the Eurobond directly or indirectly finances the already increasing Government consumption expenditure, such as to support the big wage bill, then it will bring no relief but will instead harm the economy. The Government would need to identify key projects where the proceeds would be used, and then manage these projects well to ensure they are implemented on time.
  2. Original Sin - we face the risk of what economists refer to as the "original sin". This doctrine warns against the dangers of borrowing in a foreign currency when you don't have sufficient earnings in that currency and you will service the debt in your local currency. Our bond is issued in dollars and yet we spend and collect taxes in shillings. We are, therefore, exposed to foreign exchange risks. If we suffer a situation where our shilling substantially depreciates against the US dollar, which is what the Eurobond is denominated in, the cost of servicing and repaying the bond becomes higher and this could impact on debt sustainability. For instance, if at any point during the 10-year lifecycle of our $1.5 billion Eurobond the shilling depreciates markedly against the dollar, it would mean that the Government will have to collect more taxes to translate into dollars or even borrow to pay our foreign creditors. Matters could also become complicated when it comes to paying the principle amounts of $500 million (after five years) and $1.5 billion (after 10 years).

​So what is Trending - FACTs or FICTION

There is an alleged un-accounted KES 140 Billion from the proceeds of the Euro-Bond and very many other allegations on the social media. In the social media, Kenyans are asking about life-style audits for key government officials including that of the Deputy president, the ex-cabinet secretary for devolution and many others. Questions, that seems not to have answers or worse off answers are there but do not seem to get to the preferred channel of the people asking the questions. Kenyans ask questions through newspapers, social media but the government provide answers through television, Kenya gazette, government bulletins and memos etc.

How then does the answer get to the person who raised the question. Unlike some years back, social media is a very strong channel that information flows so fast and rapidly and any person who has customers should and must have an actively supported social media channel to respond to each and every message/question raised. Failure to which, It will be difficult for an institution or business to separate facts from fiction and the customers (in this case the stakeholders of kenya - citizens included) will rely on signs and hearsay to come to conclusion on what to believe.

What Next........

The Eurobond and other questions raised in the past by the people of kenya is just a case study to our message today. When you are in business and your customer asks questions. You are obligated to provide the answer or your competition will provide the answers and you will loose your customer.

At the time of writing this article, not even http://president.go.ke had answers to the very many questions raised. All that is available are press statements with speeches from the affected ministries and institutions.

On Twiter, there is a hashtag #NothingToHide where kenyans are asked to forward questions to the government. Following this hashtag, there is no single response on issues raised and questions raised. My opinion it is a bad choice of hastag since it has non-related issues. A good choice would have been #NothingToHideEurobondKE. View the gallery below to see more non-related images on the hashtag.

To survive competition, you must personalize your services to your customers. You must listen to them in their preferred mode of communication. Why do politician talk vernecular languages whenever they have rally in remote areas? Because they want to personalize the communication. Why are other kenyans on social media not given answers in the language they understand -  a website, a chat, a tweet etc?

Unless you personalize services to your customers, competition will take advantage of your non-responsive culture, confusion and they shall win over your most loyal customers.

e-Karani is a digital integrated platform that enables, Hustlers (those who are employed but with side business), start-ups, SME's and Large corporates to be able to be more-responsive, alert and efficient in the manner in which they respond to and manage customer queries and concerns by integrating customer interactions from Facebook, Twitter, e-Mail, web-Chat, SMS and Telephone. Through e-Karani, you can get an alert about a customer query hitting either your email in-box, facebook page, twitter handle, SMS, telephone within minutes and also gives you a channel through which you can effectively and efficiently respond to these issues.

As an entrepreneur, nurture the culture of customer-centric by doing the right thing from the word go, avoid loosing your loyal customer by being more responsive through e-Karani that would ensure increased growth in sales and customer satisfaction levels.

And the packages are from as little as KES 1,000 Shillings upwards. To start, send us an email (customer[at]theserviceline.co.ke) or follow us on twitter (The_ServiceLine), or facebook (The ServiceLine).

Enjoy the gallery of sources of our data from Standard Media Newspaper, Nation Media Newspaper, Twitter, President Website etc.

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Wednesday, 23 October 2019
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