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MITIGATING RISKS IN REGIONAL BUSINESS

Financial Risk “Cash is King in Business ” By Gituro Wainaina Acting Director General Vision 2030 Delivery Secretariat Hills Trade Conference April 16, 2014. MITIGATING RISKS IN REGIONAL BUSINESS. WHY CASH?. Cash is King in Business L iquid and accessible

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MITIGATING RISKS IN REGIONAL BUSINESS

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  1. Financial Risk “Cash is King in Business” By Gituro Wainaina Acting Director General Vision 2030 Delivery Secretariat Hills Trade Conference April 16, 2014 MITIGATING RISKS IN REGIONAL BUSINESS

  2. WHY CASH? Cash is King in Business • Liquid and accessible • Gives investors opportunities in markets that are bad for those without cash

  3. WHY CASH? Cash is King in Business • Asset not tied up in investmentsand thus can be turned into actual cash without penalty or limits • Massive drops in share prices during 2008 financial crisis as partly result of insufficient liquid assets

  4. WHY CASH? Cash is King in Business • Investors who favor ‘Cash is King” opt to buy short-term debt instruments versus buying high-priced securities • More businesses fail for lack of cash flow than for lack of profit

  5. WHY CASH? Cash is King in Business • Corporation, institutions or a business must have enough cash on hand to cover short-term operations, buy assets such as equipment and machinery, or acquire other facilities

  6. KENYA – THE HUB OF AFRICAN TRADE

  7. CENTRE OF EAST AFRICA’S TRANSFORMATION East African sub- region is set for transformation given: • Region-wide oil and gas developments • Increased investment in geothermal energy in Kenya

  8. CENTRE OF EAST AFRICA’S TRANSFORMATION Investments in Rail Capacity Linking Kenya with Neighbors

  9. STANDARD GAUGE RAILWAY MASTERPLAN

  10. CENTRE OF EAST AFRICA’S TRANSFORMATION Upgrade of Port at Mombasa

  11. CENTRE OF EAST AFRICA’S TRANSFORMATION Lamu Port Southern-Sudan-Ethiopia Transport Corridor

  12. LAPSSET CORRIDOR PROJECT

  13. CENTRE OF EAST AFRICA’S TRANSFORMATION Investment in Power Triple Electricity Generation to 5,500 MW in 40 Months

  14. TARIFF EVOLUTION WITH THE NEW CAPACITY 47% reduction 37% reduction

  15. CENTRE OF EAST AFRICA’S TRANSFORMATION Expansion of Jomo Kenyatta International Airport

  16. GREENFIELD BIRD’S EYE VIEW

  17. CENTRE OF EAST AFRICA’S TRANSFORMATION Konza Technopolis

  18. CENTRE OF EAST AFRICA’S TRANSFORMATION 2013-2017 Infrastructure $1,060 M On-site $750 M Project Finance Konza Technopolis Development Authority Government of Kenya Off-site $ 310 M Financing Entities

  19. FINANCIAL INVESTMENT Infrastructure plans will boost Kenya’s external borrowing Latest Budget Outlook Paper (BOPa) confirms plans to borrow USD 1.5 billion from international markets, through a maiden Eurobond in 2014

  20. FINANCIAL INVESTMENT • This will lead to greater scrutiny of Kenya’s fundamental • Current account (C/A) deficit in double digits as a percentage of GDP is problematic • Projections in BOPa suggest that C/A deficit widened to USD 4.571 billion end June 2013 from USD 4.168 billion in June 2012 due to increased machinery and equipment imports

  21. FINANCIAL INVESTMENT • Favorable revenue performance in 2013/14 so far suggests little risk of a substantial borrowing overshoot • Despite adoption of a more devolved government • Central government is handing over more power to counties - no meaningful impact on spending is evident yet

  22. AT VDS, WE BELIEVE People First Results Now

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