Destroying Value One Step At A Time

A pastor wanted to rent an apartment for his family, but kept being denied by landlords because he had 8 children. People keep telling him to lie about how many children he had, but being a pastor, he couldn’t lie. One day, however, he decided that enough was enough. He told his wife to take the 7 younger children with her and go to the cemetery. He then took the oldest child to visit a new apartment. They went over the details of the lease with the potential landlord and right before the man signed the papers, the landlord asked him a last question: “Do you have any other kids?” “Oh yes,” answered the pastor. “I have seven others, but they’re at the cemetery with their mother.”

I have been cutting my hair at the same hair salon for the last twenty or so years. The barbers and the salon ownership may have changed over the years, but the same salon premises located in the same building remains upstanding to date. The building, located on a major street in a busy commercial district in our beloved city of Nairobi, was owned by an extremely enterprising lady owner who ensured that her commercial tenants never lacked power or running water by ensuring redundancies in place for those two key utilities. The building hummed successfully, with all floors rented out for the most part and parking was inevitably a fairly scarce commodity.

But alas! Like a good Shakespearean tale, this utopian state of existence has come to a screeching halt. Sometime in the last two years, the building ownership changed when the lady owner sold it to a buyer who had allegedly recently come into funds from winning a huge lawsuit against the government. For reasons best known to the buyer, the management of the building was allegedly handed over to the son.

I drive a pick-up. You can imagine my dismay when I drove up to the gate late in 2019, a gate that I’ve driven up to for the last twenty or so years, and was very politely informed by the guards that pick-up trucks were no longer permitted parking within the building premises. I would have to park outside. I asked why in total befuddlement. “Madam,” the stroppy guard responded – never give a Kenyan guard a little power that he never had before as it will be zealously applied – “hapa tumeambiwa watu wanahama sana. Na hawalipi kodi wanaodaiwa. Kwa hivyo pick-up haziruhuswi vile zinabeba vitu za watu wanaotoroka.” Right. So pick-up trucks were being used to carry office furniture for allegedly escaping tenants. Tenants who were allegedly not paying their rent. Consequently, all pick-up owners were blacklisted and labelled with the official “rent avoider escape mode” moniker. So the guard was not going to let me in. Period. My tenacity and righteous indignation eventually got me in, which is a story for another day but it left a horrific taste in my mouth and even more roiling anger experienced by the salon owner whose numerous clients had fallen victim to this inexplicable edict.

Last Friday, I went for my usual haircut. My car was one of two in a parking lot that used to heave on all sides with tens of parked cars. The previous weekend, my hair cut had to be abandoned midway as there was no water to wash heads, and there was no water because the external water pump was not working because electricity had gone and the fuel of the power generator had run out because the landlord did not see the need to have a back-up generator on standby. Tenants from the upper floors are not allowed to use the lifts over the weekends and if they have given notice to vacate, even from the top of the seven storeyed building, they are then not allowed to use the lift during weekdays.

The building is a pale shell of its existence two years ago. I have watched a singular landlord destroy client value inherited from the previous landlord. Goodwill destroyed. Relationships with decades-old tenants being destroyed. This is happening in a real estate environment where the supply of commercial office space by far outweighs the slowing demand, covid-19 notwithstanding. What is visibly apparent is that any business sense for the landlord family may have been buried in a cemetery years ago. Exhuming the same will require the prayers of a thousand pastors.

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Twitter: @carolmusyoka

Kenya’s Visa Open Door Policy is a Gamechanger

Earlier this year, I went to Londonfor a work assignment and only encountered a living, breathing English native a full 24 hours after landing. The immigration officer at Heathrowairport was a lady of Indian extraction, who happily described her last holiday in Kenya a few years ago and shared how she was a first generation Indian but naturalized UK citizen. The driver who drove me to my hotel was a Hungarian who was now working in London under the free labor movement that the European Union policies provided. I was checked into the hotel by a Polish receptionist, and found that most of the hotel staff were largely from Poland and the Czech Republic. It was only when I went to the client offices the next morning when I finally encountered native English speakers.

In a paper titled “Brexit and the Impact of Immigration on the UK” by Jonathan Wadsworth, Swati Dhingra, Gianmarco Ottaviano and John Van Reenen, the writers research revealed that European Union (EU) immigration has tripled in numbers in the last twenty years. In 2015, there were around 3.3 million EU immigrants living in the UK up form 0.9 million in 1995. Around 2.5 million of these immigrants are aged between 16-64 and about 2 million are productively working. EU countries account for 35% of all immigrants living in the UK with the greatest concentration in London. EU immigrants are on average more educated than the UK-born and almost twice as many of them have some form of higher education (43% compared with 23% UK born).
Why is this relevant to Kenya and the East African Community (EAC)? President Uhuru Kenyatta’s speech at his November 28th 2017 inauguration generated food for immigration thought. Assuming his speech is expeditiously turned into policy, EAC nationals will only need an identity card to work, do business, own property farm, marry and settle in Kenya. This is regardless of whether their own governments reciprocate the same benefits.

Within three hours of that speech, a friend of mine from one of the EAC countriessent me a clip of the President’sspeech and said that she could now buy a farm in Nanyuki as she had always desired. Clearly, the speech got some excitable EAC traction and one that demonstrates the potential for significant intellectual and financial capital for Kenya. Save for our incessant 5 -year political bickering, we do have a stable economy, a well educated populace and a reasonably good infrastructure to attract EAC nationals to live, work and do business here especially considering that our national carrier’s network connectivity ensures you are a maximum of ninety minutes away from every EAC capital.

Together with the policy to provide visas on arrival for African passport holders, the President’s proposals can be interpreted through the futuristic lens of making Nairobi an international financial centre as well as the region’s foremost conference destination. The fact that we will be able to attract EAC’s top talent to work makes us an even more attractive destination for foreign direct investment as the talent gene pool just got that much more enriched. Multinationals and international agencies operating in Africa looking to do their conferences should now consider Kenya as their first choice of conferencing due to the ease of visas for conference attendees.

Notably, there is also a potential knock on effect on the residential real estate as demand for good quality housing for the incoming business and professionals should increase, as the buyer and tenant pot has now expanded beyond Kenyan borders. However an unintended consequence will be that it may provide a potential avenue for “regional hot money” investments which may drive up the cost of real estate for genuine Kenyans as we saw with the Somalia piracy proceeds that had a direct knock on effect on prices of land in Karen, Nairobi and Nyali in Mombasa. London has also experienced the same with the average native Englishman unable to afford central London housing due to Arab, Russian and Chinese demand driving up property prices.

Strengthening of county economies will be critical so that native Kenyans still have opportunities for employment and business outside of Nairobi, which will ensure that competition for jobs, as well as xenophobic tendencies do not start to prevail. If successfully executed, the “Kenya Open Door Policy” will dilute Nairobi’sstatus as belonging to Kenyans only and elevate its stature as an African economic hub which will be a big game changer for the politics of this country.
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Twitter: @carolmusyoka

JKIA As The Engine For Kenya’s Economic Growth

Last week a work trip led me to pass through my favorite airport Schiphol in the Netherlands. Coming in on the final descent into Amsterdam, I noted there were at least 4 other flights in the skies above us, leaving a tell tale trail of white jet stream in their wake and I marveled at the remarkable skills of the Dutch air traffic controllers in keeping all these planes safely in their own paths. About 5 kilometres to the west of our descending plane was another plane that was moving at the same speed and altitude as we were. The similarity of movement was certified when the landing gear for our plane was released in perfect synchronicity with the neighbouring plane. That’s when I realized that both planes would be landing at exactly the same time albeit on different runways. I didn’t see the plane again as we descended into heavy fog that clung to the ground rendering visibility next to zero and I assumed that the plane landed without incident.

I became very curious about the size of Schiphol airport thereafter if two planes could land simultaneously and never meet again. It took at least 10 minutes for the plane to trundle along the interconnected network of taxiways to the terminal. Often, the vehicular traffic on the Amsterdam highways ran under the taxiways, confirming the fact that the airport expansion was a continuous evolution in a neighborhood where land was a scarce resource. It bears noting that Amsterdam’s Schiphol is the 14th busiest airport in the world and the 4th busiest in Europe.

But the airport is specifically and strategically operated to connect Netherlands with all the important economic, political and cultural cities in the world. This goal has been a financial success as Schiphol’s aviation operations contribute €26 billion (Kshs 2.7 trillion) to the Dutch GDP, with 500 companies located at the airport employing 65,000 people. The airport is connected to 323 direct destinations, resulting in 52.6 million passengers and 1.5 million tonnes of cargo annually. There are 425,565 take-offs and landings – collectively called air movements annually. This translates to 1,166 daily air movements. Total real estate on the terminal side is 650,000 m2 with 5 runways all of which are on 6,886 acres. On the revenue side, the airport generated €1.4 billion (Kshs 145 billion) in 2013 with a net profit of €227m (Kshs 23.6 billion).

It’s not difficult to see how the operating company – Schiphol Group – manages to generate good revenues through the execution of their business strategy. The business is run as a combination of four main operations: Aviation, Consumer Products & Services, Real Estate and Alliances & Participations. The Aviation business area operates at Amsterdam Airport Schiphol and provides services and facilities to airlines, passengers and handling agents. It generates 57% of the total revenue for the group.
The Consumer Products & Services business area develops and manages the range of products and services available at Amsterdam Airport Schiphol, the key objective of which is to ensure that passengers enjoy a carefree and
comfortable journey. The business area grants concessions for retail and catering outlets, services and entertainment facilities, and operates retail outlets and car parks. It also creates advertising possibilities at Amsterdam Airport Schiphol. This generates 25% of total revenues. Real Estate develops, manages, operates and invests in property at and around Schiphol and other airports and generates 10% of total revenues. From the property under management, 33% are used as offices while 44% are used as industrial units. Alliances & Participations, which generates 8% of total revenues, consists of Schiphol Group’s interests in the regional airports in the Netherlands and its interests in airports abroad.

If you ever have the pleasure of flying into Schiphol airport, you will attest to the fact that it is the gateway to Dutch culture and plays an extremely prominent role in promoting the country as a tourist destination. Apart from the fact that the shops, restaurants, lounges and rest areas are of the highest quality with very friendly and professional staff, the visual layout of the airport is a constant reminder that there is more that lies to the country outside the confines of the terminal buildings. The success of the customer experience at Schiphol means that there are several repeat customers. 67% of the total passenger throughput in Schiphol are from outside the Netherlands.
What does this all mean? Airports can be big business. Kenya’s geographical location in right in the middle of the continent continues to undoubtedly place us, and Kenya Airways in particular, as the principal hub for intra Africa travel. Which is why the success of our national airline is symbiotically related to the success of Nairobi’s Jomo Kenyatta International Airport (JKIA). However, our airport lets us down. But then again, it’s not like we have jaw dropping or awe inspiring stories from the other competing airports such as Ethiopia’s Bole and Johannesburg’s Oliver Tambo. The two have relatively newer facilities, but the (sad, bad and sometimes mad) attitude of their employees and the general perception of being a weary traveller’s pit stop is completely lacking. It is also noteworthy that not a single African airport appears in the top 50 list of busiest airports in the world. Yet, if you look at any global map, Africa sits plum in the centre and should naturally be the centre of global aviation paths. But then pigs would fly and other supernatural stories. It also bears noting that Schiphol Group’s shareholders are: State of the Netherlands 69.8%, Municipality of Amsterdam 20.0%, Aérports de Paris 8.0% and the Municipality of Rotterdam 2.2%. A Central and two Municipal governments own one of the most successful airport businesses in the world.

Politics can be set aside to provide a world class institution, run on world class business principles and delivering a world class experience. With the right management and incentives, JKIA can and should be a key driver of our economic growth engine.