Public Sector Modelling: Why Does It Matter?

The effectiveness and efficiency of a country’s public sector is vital to the success of development activities in that country. To achieve a well oiled and functioning public sector one thing is critical, decisions made need to be driven more by analysis and quantification of intended impact and less by gambles and political agenda.  At InVhestia we are proud to be a pioneer in supporting Governments and parastatals improve the quality of their decision making through financial modelling. While the majority of our work is private facing, we have realized that it can also inform the public sector. Financial modelling which sits at the core of what we do develops tools that can be used to remove the gamble from complex decisions, be they business choices or public policy.  Over the last couple of years we have been involved in a number of assignments which show how modellling can support the public sector to improve effectiveness and efficiency.

Support for the Government of Zambia in Fiscal Regime Review and Setting

Zambia is highly dependent on mining as its major productive industry contributing to 68% of the countrys foreign exchange earnings, anything that affects their extractive sector significantly affects the countrys economy. Since 2018, through the Zambia Extractives Industries Transparency Initiative, InVhestia has been offering support to the Government of Zambia through capacity building in financial modelling focused on fiscal regime setting and in consultancy services. The consulting services have been geared towards reviewing the impact of changes in fiscal regime on Zambia’s earnings from the extractives sector and the impact on company returns.  Whenever a Government is thinking about changing its taxes in the extractives sector, two factors need to be balanced, how the government take (total earning to the state) will change compared to company returns (these can be measured using the Net Present Value, Internal Rate of Return etc).

Through this work, we have seen improved skills in model build and review and in better engagement between the Government of Zambia and mining companies.

Benchmarking of Kenyan Mineral Royalty Rates with Peer Economies

According to the economic survey, the mining sector in Kenya contributes 0.8% to the country’s GDP. The State Department for Mining is mandated to provide regulatory oversight through the implementation of the Mining Act, 2016. In 2017 InVhestia was enaged to offer financial modelling support in seeking to establish whether royalties charged for gold, coal and titanium under the Act and accompanying regulations and gazette notices were adequate. Our report, as commissioned by the Extractives Hub and written in conjunction with Open Oil was presented to the then Cabinet Minister, Ministry of Mining. The high-level benchmarking exercise showed that Kenya’s fiscal regime falls broadly within norms observed in peer countries.

In preparation of the report we modelled out sample mines for the three resources under the Kenyan fiscal regime and compared the earnings to the Government to what other leading countries were charging and earning from similar resources.

Turkana Oil, should Kenyans be excited?

In 2018, InVhestia published an analysis on one of the oil blocks in Turkana which you can download here. In the report we sought to answer questions such as, how much Kenya will earn from exploiting the resource, how this will be split between the National and County Government and the community, the returns to the Contractor on the project among others.

The report and the accompanying model had critical analysis which at the time was useful in the debate around what formula should have been used to split the earnings from Oil. It also shed light on the feasibility of the project under different price scenarios.


The public sector requires financial models to inform strategic decisions. This is an effort that is also supported by the African Development Bank (AfDB) who launched a project on strengthening domestic resource mobilization through financial modelling for the extractive sector in transitional countries. One key objective is to enhance the capacity of state agencies to forecast and monitor revenues from projects and investments. While it would appear that the focus is largely in the mining sector, public policy in oil and gas, energy, transport and infrastructure, health, housing, planning, industrialization among other sectors can also benefit from the analysis of data through financial modelling.

More and more, financial modelling is proving useful to contribute to pertinent debates which in most cases, have a bearing on livelihoods of millions of persons. Johnny West from Open Oil put it well when he said, “Models can be great ‘rumour killers’, they may show that a country’s offshore sector is not going to save the entire economy, public finances, or end poverty. Or, they may demonstrate that a deal was actually OK.”

We are pleased to be pioneers in this space. We plan to share an update on our Turkana Report before the end of year. To join the mailing list, fill the form on our website.

Stephen Gugu, David Ndungu, Nyambura Ngumba

Personal Development for University Students: The Launch of InVhestia Financial Modelling Competition 2020

‘Education is key to personal development and the future of societies. It unlocks opportunities and narrows inequalities. It is the bedrock of informed, tolerant societies, and a primary driver of sustainable development. The COVID-19 pandemic has led to the largest education disruption ever. We are at a defining moment for the world’s children and young people.’ These are the words of Antonio Guterres, the ninth Secretary-General of the United Nations at the launch of the policy brief: Education During Covid-19 and Beyond.

InVhestia has run an inter-university competition over the last 4 years. The initiative was launched when we realized financial modelling is not a widely practiced discipline and that revealed a skills gap in recent graduates entering the workforce. Over the years we have trained students in in various Nairobi based universities with top students getting internships and working on projects for institutions such as Open Oil, and getting internships at institutions like KPMG, InVhestia, HEVA Fund and Horizons Africa.

Last year, the FAST Standard Organization and F1F9 sponsored the competition which saw us reach more students than previous years. One of those students is Valentine Wahome, a 4th year student at the University of Nairobi. Valentine sat in for the training session carried out by a former winner of the competition. “This was the first competition I’ve ever participated in. I learnt about the training session from a student leader. What stood out to me in the session was how easy and efficient working in Excel seemed. Our school curriculum teaches us to use notebooks and a calculator. I had a hard time understanding macros but I submitted my model. I did not think I stood a chance but figured I should give it a shot nonetheless,” he says. Valentine ranked as top 10 in the competition and secured an internship opportunity. “Through this experience, I’ve learnt that financial modelling does not only mean good Microsoft Excel skills but rather understanding the assignment at hand and what the business or investor wants to accomplish.” He sat his FAST Level 1 Certificate Test and passed.

We are launching our 5th Edition of the competition, but this will be one like none other before it. Given the prevailing circumstances, we cannot go to the universities. However, we are going to leverage our digital learning platform to give the students access to top notch financial modelling content . “This year we are opening the competition up to students across the continent which is the positive outcome of going strictly online. We will give them free access to our courses and conduct webinars that they can access at their convenience. We are also looking for partners who will allow us to reduce the barriers as far as internet access and by increasing internship opportunities for the finalists. We believe this is the best time to invest in the personal development of the youth and build the next generation,” said Stephen Gugu, Principal at InVhestia.

We are pleased to be partnering with the FAST Standard Organization for another year and look forward to impacting even more students.  We agree with Mr. Guterres that education is the key to the future of society.

Follow our LinkedIn, Facebook and Twitter pages to schedule important dates share with university students near and far.

If you would like to partner in this initiative, send an email to


Financial Distress? Company Voluntary Arrangements

Every entrepreneur’s goal is to provide a solution to society by providing goods or services which are differentiated and which solve a specific problem. Such action assumes the business will remain a going concern. Along the journey of the business, poor economic conditions or poor management decisions affect the business resulting in its inability to service its obligations as they fall due.

If a company sustains a long period without paying its liabilities, the company is financially distressed; such companies experience decreased product demand as a result of not being able to stock sufficient and required inventory, which in turn is attributable to the company’s inability to meet obligations to suppliers. This situation leads to high cost of financing and unfriendly terms of trade.


When a company gets into financial distress, it can be placed under administration. Part VIII of the Insolvency Act 2015 (the Act) requires appointment of a qualified person (appointed by court, the company or holder of floating charge) as an administrator to manage the affairs of company. The overall objective is to maintain the business as a going concern and avoid liquidation. However, administration isn’t always successful and liquidation becomes inevitable. Part VI of the Act guides on the liquidation process but liquidation is considered only after the administration process. While administration is an option available to restructure a company, the Act introduces other alternatives.


A company in financial distress doesn’t need to wait for the administration process. The directors of the company may propose to the company creditors a voluntary arrangement on how to settle the outstanding debt. In making the proposal, the directors of the company appoint a licensed insolvency practitioner to guide the CVA process.


Step I – The Proposal

The company, through its board resolves to utilize CVA as a way to restructure the business. The board then makes a proposal to its shareholders and creditors for a voluntary arrangement with respect to its financial affairs. The directors must also nominate a Provisional Supervisor, “the Supervisor” who must be a licensed insolvency practitioner to supervise the implementation of the voluntary arrangement.  The proposal should include the following:

  • Information about the company & background
  • A Statement of affairs
  • Proposed method for restructuring the outstanding debts: senior lenders, preferential creditors, and unsecured creditors. This would include waiver of interest and penalties, lengthened debt tenor, moratorium, haircuts, debt equity conversion among others
  • Impact of the restructuring process on the financial position of the business
  • Turnaround business optimization strategy

The Supervisor reviews the proposal and gives his opinion on whether it has a reasonable chance of success. Once the Supervisor is satisfied with the proposal, he files a report in court and asks the court for permission to convene a creditors’ meeting. The supervisor is also required to have confirmed the claims of the creditors prior to the meeting.

Step II – The Creditors’ Meeting

The main purpose of the meeting is to decide whether to approve the proposal as is, introduce modifications or reject it. A modification to the proposal may be approved if the company consents.

While the meeting is convened by the Supervisor, at the beginning of the meeting, the creditors must elect one of their own to be chairperson for the meeting.  For voting purposes, the meeting is divided into 3 groups; secured creditors, preferential creditors and unsecured creditors


Section 665 of the Insolvency Act of 2015 states that the proposal is approved if:

  1. A majority of the members of the company present at the meeting approves the proposal (Shareholders)
  2. A majority of the members of each group of creditors (number and value) present at the meeting approve the proposal. Approval by each group of creditors supersedes that of members in case members vote against the proposal

A proposal (with or without modification) takes effect as a voluntary arrangement by the company on the date in which the court approves and it is binding on the company and its creditors.


Uchumi is currently facing financial challenges. Consequently, there is an urgent need to reorganize the business to be able to meet its financial obligations while responding to a highly competitive and evolving business environment.

In the reorganization process, management decided to liquidate a non-core asset, a 20-acre parcel of land in a bid to settle some of the debt partially and at the same time inject some liquidity into the business to finance working capital to enable the business to achieve revenue growth and consequently improve its cash flow position.

Uchumi Supermarkets PLC engaged InVhestia Africa Limited to prepare a debt restructuring plan. The proposal was presented to the creditors on 2nd March 2020, at Bomas of Kenya.

The proposal recommended the following to each category of the creditors based on cash flows

  • Unsecured Creditors: 30% payment over six years on an annual basis, 30% discount or haircut and 40% conversion to non-cumulative convertible preferential shares
  • Preferential Creditors: 100% payment over six years on an annual basis
  • Secured Creditors: The proposal submitted included a mix of Lump sum payments, Full and Final Settlement (FFS), haircut or discount on the outstanding balance and restructuring the remaining balance over seven years

The table below summarizes the voting results of the Uchumi CVA proposal.

Written by James Wambua and Steve Ogada


From Chama to Conglomerate: What You Need to Know

My earliest memories of a chama include food in plenty and loud laughter followed by hushed tones in serious conversation. My mother and her lady friends have met consistently once a month for over 27 years. They are my “aunties”, the ones with no familial relation, every African has some. But a chama is so much more than meetings. According to the 2016 FinAccess report, 1 in 2 individuals in Kenya is a member of an informal financial group. As is mostly the case, it starts out to help meet a household need like school fees, or results from a group of friends who desire to grow their businesses, others have come together because they attended the same high school and feel the urgency to “jipanga”(loosely translated to financial planning to attain financial freedom). Wherever you go, in Africa, these groups exist. These are the people you invite to raise funds for your wedding, medical assistance due to unexpected illness or the final rites for your loved ones.

Longhorn Publishers together with author Mr Tony Wainaina recently launched the book “The Investment Group Handbook: From Chama to Conglomerate”. According to the Mr. Wainaina, this book is necessary because investment groups, or “chamas”, despite their numbers and value of assets pooled over the years, remain largely informal, fragmented and have no institutionalized support systems to help them unlock their potential. At the event, he said, “While saving and investing individually is good, doing the same with others works better because groups already exist in culture and help to solve challenges. Another key benefit is the peer pressure to meet your responsibilities.” People often leave their chamas due to changes in life priorities or due to disagreements. Others remain, but aptly put at the launch by Stephen Gugu, “have never seen the plot of land the chama bought 2 years ago.” Whether you fall in one of these categories or represent the other one person, here are some key take-aways from a panel discussion at the book launch.

  1. Governance is a key issue for chamas. Are members like-minded? Do you have the same risk appetite? It is impossible to have the whole group be leaders and often the most outspoken member determines the way forward, but are they qualified? There should be structures and policies in place for each group. Just as no company runs itself, things will not just happen. Take your chama as seriously as you do your job. Often groups are reluctant to spend money but investing in professional services and hard work will pay off. The challenge of succession also needs to be addressed. Tony Wainaina, author of The Investment Group Handbook: From Chama to Conglomerate.
  2. The principles in this book are what we have used ourselves. The most critical thing is clarity of vision because without it, execution is impossible. Building momentum takes time, it shouldn’t be considered as short term. It is important to individuals to be aligned, is the group for social safety or investment? Work within your circle of competence and avoid the scarcity mindset. Being positive and ambitious stimulates growth. Dr. James Mworia, CFA, Group Chief Executive Officer, Centum Investment Company PLC.
  3. You cannot treat saving and investment as a luxury. If you are investing what you cannot afford, the pain will make you show up. It is not possible to create wealth in a comfort zone, there needs to be a sense of urgency. This may mean that some people need to leave their chama. We encourage people to move from a mindset of consumption to one of saving. Of all the formulas we learn in life, multiplication is most important. Consider this: How can I multiply money, ideas, my skills and my network? Waceke Nduati Omanga, Entrepreneurship Coach and Author and Founder, Centonomy Ltd.
  4. Even the Bible says that lack of knowledge leads people to perish. Groups should get good advice and consider that success means various things to various people. Once good foundations have been set, and this includes an investing policy, we can begin to unlock the potential in chamas. It is also important to tell the success stories; we should do it more often and louder! Patrick Kariuki, Chairman of the Association of Investment Groups and Chief Operating Officer, Genesis Kenya.

And that is what this book sets out to do. Tony Wainaina looks at 3 Kenyan investment group case studies and details what has happened 6 years since he initially profiled them in the first edition of his book. As Mr. Wainaina puts it, “All this investor class requires is capacity building, and that starts with giving practical guidelines on what to do to improve their capability to create real, sustainable wealth.” The book is available for purchase at Text Book Center.

Written by Nyambura Ngumba

My InVhestia Competition Experience

I started my internship in late August 2019. My role was to help organize and facilitate the 4th InVhestia FAST Standard Financial Modelling Competition. I was very ‘green’ in aspects of finance, modelling, and everything related to the field. I did however, have a background in event organizing as the Vice President of AIESEC at my alma mater JKUAT. I had also helped organize the training for the 2017 edition of the InVhestia competition. So you can say I did know my way around when it came to events.

Coming from a background of Mechatronic Engineering, one would imagine that project management would be a lot less technical. I knew I could rely on my knowledge of student events, but I had to learn quickly that there is a science behind marketing, a voice that has been honed by InVhestia. There needed to be a balance between making things fun and suitable for student audience, but also maintain a level of formality and professionalism, if I can call it that.

As we approached different new universities, I was able to appreciate the diversity of Kenyan universities. I was encouraged by the enthusiasm of administration personnel who are eager to give their students opportunities to learn outside of the standard curriculum. It felt like we all shared a common goal, to have financial modelling using the FAST Standard known by all students.

Here are my key takeaways from the competition:

  1. Be open minded

Another huge learning for me was not to close off your brain with regards to what you can or can’t do. Your background should not make you shy off from new challenges. My first task was to create a poster, something I had not done before. Stress! But once I got the right tools, it realized that I could do it. The same thing with social media; it was somewhat new for me, but again, the analytic tools helped me figure my way. Once I was in the zone, I was able to have an enjoyable experience.

I am glad I got to work in a corporate space. Here, you have to know what your plan is for every day so that you’re productive. My background was mostly field work, so I had to learn how to manage my time quite fast.

  1. Take the initiative

My first training was at UON. I thought all I had to do was plan and schedule the training, and that was it. That didn’t go as planned. My supervisor Nyambura asked me to talk about the competition in front of the students. It wasn’t something we had talked about so it caught me off-guard. I am not a public speaker, so it was quite honestly nerve-racking. However, it did also serve as an eye-opener. It pushed me to learn more things about the company and the competition. I saw the importance of knowing your stuff when talking to people so that you stand out as an authority.

The exposure I got at InVhestia was beneficial not just for me but the students I was interacting with too. They showed interest in and engaged more with the brand. It was evident that, for some, it was a once in a life-time kind of experience that pushed them to take the initiative. It was refreshing to see students looking to self-improve. It is not often that you see students take that kind of initiative. By the end of the campus tours, I had been added to quite a number of student WhatsApp groups. And I’m proud to say, mimi ni member!

  1. Patience

My other lesson was being patient! Each campus we went to had students who had different exposure as far as working in Excel. For some, building formula was a walk in the park but for others, we needed to go step by step, several times. This repetition also showed resilience in the students, their willingness to learn. By the third day of the competition, very few students had submitted their models. This was discouraging for me, especially because I had seen the excitement in the training sessions and groups. But in true Kenyan fashion, the submissions started flooding in on the last day, and the last hour, the last minute, to the last second. This year we had 92 submissions, which is the highest it’s ever been and I am very proud of that.

Final thoughts

What stood out for me was the impact that the FAST Standard Financial Modelling Competition has on students. You could see that they needed the exposure, and when they got it, they ran with it. Truth is, there were highs and lows, but the highs by far outweighed the lows. The marking is now ongoing and I am now excited to see the results and the impact in the lives of the students.

Written by Wangui Kinyori

Kenya is an Oil Exporter; How Much Do We Receive For The Oil We Sell?


Turkana is Kenya’s first oilfield. It was discovered in 2012 by the Anglo-Irish firm Tullow Oil which has aroused great interest in Kenya. Kenya introduced new rules to share revenues from natural resources as part of a broader move to strengthen the county governments.

The fiscal regime is challenging since the contracts for the two areas in the Turkana project, 10BB and 13T, have not been published. We modelled the fiscal regime on the contract for 10BA, which was licensed in the same round and for which headline terms are available and, where appropriate, public comments by officials.

The President of Kenya, Uhuru Kenyatta on August 1st 2019 said the following:
“We (Kenya) are now an oil exporter. Our first deal was concluded this afternoon with 200,000 barrels at a price of USD 12 million.”

The USD 12 million is good income for the economy for various reasons including forex flows, jobs, GDP contributions etc but it would be good to understand how much would actually flow to the country and the split among various parties. It would be good to know how much would flow to the National Government, Counties and to the Community.

To answer these questions, one needs to have a view on assumptions around the project’s economics and on the fiscal regime. Below we highlight the assumptions we used to come up with approximate values of how the revenue generated would be shared.

So how would the USD 12 Million be distributed?

  1. Cost recovery: Tullow oil has incurred development costs, exploration costs and recurrently incurring operating costs. Before sharing, the company is allowed to use 60% of the oil revenue to recover the costs incurred until full recovery. In our case, since it’s the initial sale the company is required to use 60% of the USD 12 Million to recover the costs, that is, USD 7,200,000. This results to a profit oil of USD 4,800,000.


  1. Government and the company profit oil sharing:
  • The government receives 60% of the profit oil, that is, USD 2,880,000
  • The company receives 40% of the profit oil, that is, USD 1,920,000

  1. National Government, County Government and Community Share
  • National government receives 75% of total government share (USD 2,880,000), that is, USD 2,160,000
  • Turkana county receives 20% of total government share (USD 2,880,000), that is, USD 576,000
  • Turkana community receives 5% of total government share (USD 2,880,000), that is, USD 144,000


Summary of the Oil Export Proceeds

What does this mean?

The sale of oil does not mean actual income to the Government. One has to look at the production sharing contracts to arrive at how much the Country would make from a sale and how much the company ends up making. Unfortunately, in Kenya we do not have the details of the production sharing contracts and as such cannot tell how much cash SHOULD go to the National Government, the Counties or the Community. This is quite unfortunate because it then means numbers cannot be verified!

However, based on publicly available data one can see that there’s a long way to go before Oil can become a key contributor to the economy. To put the numbers in perspective, the just announced 2019/2020 budget is at USD 28 Billion. The amount earned from the initial oil sale contributes to just 0.043% of this. Further if you look at the Turkana County Allocation for the budget 2019/2020 of USD 111,778,110, the Turkana County earnings from this sale would only contribute to 0.515%. Lastly if you look at the community in Turkana (in this case understood to mean the inhabitants of the county), there is a population of 1,341,972 as at 2016 as per County Allocation of Revenue Bill 2019. If the amount was to be shared among each of them, the per head amount would be USD 0.107.

Early oil is definitely a good start in proving viability of the Kenya’s Oil, however a lot still needs to be done to ensure Kenya’s Oil play the role it should in the Country’s growth!


What is finance without the concept of time?

You know that distress call that comes in once in a while from a distant family member or friend asking for a boost because it’s mid-month? I’m sure many can relate. It is always followed by a long text providing the reasons why you should help them. In most cases these reasons, end up guilt-tripping you into sending them MPESA which is then followed by a Thank You note from them and a promise to repay by end month. Well, this promise is never kept and you end up doing constant follow-ups only to be repaid the original amount after a few months. At this point you are just happy that they have repaid you not noticing that from an economic stand point, you have been short-changed since the repaid amount is worth less because of inflation. This is also known as the concept of time value of money. It holds that a dollar today is worth more than a dollar tomorrow. From this one can deduce that time is a very important metric in any financial transaction. It lays the foundation for any form of asset valuation and interest on loans.

When coming up with a financial model, a financial analyst should take into consideration the operations of a business or a project over the modelling period. The timing aspect of a financial model is tracked using the time sheet in the model. The time sheet forms a foundation of any financial model as it is used to map out all the transactions and balances from the beginning of the model period to the end. In a FAST Compliant Financial Model, a time sheet contains calculations with respect to dates, flags and any other time-related computations.

Why is it important to have a time sheet in a financial model?

  • A time sheet provides the basis of the timelines for the financial model. For instance, the time sheet would indicate which columns detail historical values and which ones indicate forecasted values within a financial model
  • A time sheet also helps in answering the question “when?”. A time sheet can be used to map out when a given financial transaction will happen within the financial model timelines
  • It improves flexibility within the financial model. Models that do not incorporate a time sheet in their structure are rigid especially when it comes to making changes that relate to time. For instance, when one wants to change when the valuation for a business will be done, the valuation will need be recomputed in a different cell (relating to the new period) as opposed to just changing the valuation period date

What is contained in a time sheet?

A typical time sheet in a FAST compliant Financial Model will contain the following sections:

  • Time Ruler – This section maps out all the financial model timelines from the beginning of the financial model period to the end
  • Flags – A flag is an ON and OFF switch in a financial model. A flag is normally in binary form whereby a YES will be indicated as 1 and a No as a 0. It is mostly used to indicate the occurrence of an event. For instance, a pre-forecast period flag would show 1’s in the historical period and 0’s in the forecast period

We have received requests from various financial analysts on the need to develop a course that maps out the steps for creating a time sheet. We have put together a short course on the same that can be accessed using this link.  This is the first of several resources we plan to launch on our learning platform. We hope you enjoy the course.

Written by David Ndungu

Renewable Energy: A Visit to Olkaria Geothermal Plant

An analysis of the national energy sector in Kenya carried out by Energising Development Programme (EnDev) shows heavy dependency on wood fuel and other biomass that account for 68% of the total energy consumption (petroleum 22%, electricity 9%, others account for 1%).  This dependency on biomass is not sustainable in the long run and thus the move to renewable energy. As consultants in the Energy sector the InVhestia team, with the invitation of KenGen, decided to take an educational excursion to the Olkaria Power Plant.

KenGen is the leading electric power generation company in Kenya, producing about 75 percent of electricity capacity installed in the country. The company utilizes various sources to generate electricity ranging from hydro, geothermal, thermal and wind. Currently, KenGen’s generated capacity is up to 1630MW in the proportion of 50% Hydropower, 33% Geothermal, 15% Thermal and 2% Wind power. The organization is looking to phase out the non-renewable energy plants by commissioning more in the renewable energy plants especially geothermal in the Olkaria Area.

Olkaria Geothermal Plant is located south of Lake Naivasha. Olkaria I Power Station was the first geothermal power plant in Africa. The plant was commissioned in three phases and has three units each generating 15MW of electricity bringing this to a total of 45 MW. The first unit was commissioned in June 1981, the second and third units in November 1982 and March 1985, respectively. The second phase of Olkaria I was commissioned in 2010. The plant operates at an efficiency level of 95% since commissioning this is due to the wellhead technology developed by the company.

We started off with a quick introduction to the process involved in converting the geothermal energy to electric energy. Wells are dug in the earth and can go to depths of up to 3 km. The aquifers release steam which is fed to the separator which separates into dry and wet steam. The distinction is based on the temperatures. When the steam is heated, anything below 150oC is considered wet steam and reinjected into the well after passing through the cooling towers. The steam that is above 150oC is dry steam and is fed into the turbines. The reinjection is important because it contributed to the green aspect of this type of energy and ensures no wastage. An important point to note was the fact that the only waste produced in the generation process is only water vapour, which is not harmful to the environment. Hydrogen sulfide is also a byproduct of the process which gives the plant the smell of eggs but is not harmful to humans and animals.

After the brief presentation and safety demonstration, we moved own to the plant which is divided into production wells as well as the transmission station. We noticed that there were pipes running throughout the site that were insulated and painted green for camouflage and some were even manipulated in a way that looked like they were passages or archways. We were informed that this was for the benefit of the animals at the Hell’s Gate National Park so that the plant does not interfere with the ecosystem in the park.

We first stopped at an old well which was not part of the production stream by had all the equipment up. The next stop was at the rig where a well was being dug up and we saw the height and magnitude of the rig that enables for the depth of the well to be achieved. The next stop was the power plant where we got to see how the steam from the wells is passed to the turbines. From the separator the steam is directed to three different reservoirs that service three main turbines. It is in the reservoirs that appropriate pressure of steam is regulated so as to enable them drive the turbines. The cooling tower is also part of the plant and is used to get the steam down to an appropriate temperature so it can be reinjected.

We wound up at the Geothermal Spa which offers recreational and therapeutic swimming in the Blue Lagoons. There are three cascading lagoons that receive geothermal water or brine, collected through a system of lagged pipes from various wells within the Olkaria Geothermal field. The brine is said to have a healing effects and is a recreational facility within the plant.

The Global Energy Perspective 2019 reports that wind and solar accounted for more than half of new power generation capacity additions in recent years. This is an indication that renewables will continue to penetrate the global energy mix. The Sustainable Development Goal (SDG) 7 – Ensure Access to Affordable, Reliable, Sustainable and Modern Energy for All, has also contributed to the move to renewable energy globally. This is evident even closer to home with KenGen working to do the same in their plants. As Consultants in the energy sector, InVhestia has worked on a number of energy projects, both wind and hydropower. This includes the Kipeto Wind Farm in Kajiado County that most recently reached financial close and has commenced construction and Embobut Hydropower in Kerio Valley that is currently in the pre-feasibility stage. The trip was imperative to the team, this is so that we are better informed when consulting clients and when a such a time comes that we are called upon to advise on a geothermal project we are sufficiently and appropriately prepared.

This article was written by Jihan Haji, a financial analyst at InVhestia Africa. Jihan has worked on assignments in energy and is a FAST Standard Level 1 Certified financial modeller.

The Affordable Housing Project In Kenya – Are You the Target Market?

The Government of Kenya aims to transform the country into an industrialized middle-income economy by 2030 and it is on this basis that the Affordable Housing agenda was launched. This is one of the pillars of the Big 4 Agenda. The programme has received mixed reviews with the biggest questions on most Kenyans minds being if and how they will benefit. There has been uproar over the Finance Bill 2018, which introduced a 1.5% mandatory levy on worker’s gross salary as contribution for the program. The matter is still in court and seems to be the massive hurdle that the government needs to overcome. We had a look at the proposal and tried to address some of the concerns from the buyer’s point of view.

The Economic Times defines affordable housing as housing units that are affordable by that section of society whose income is below the median household income. Affordable housing projects are important for developing countries as they address the housing needs of middle and lower income households who can’t otherwise afford to buy houses at the market price. The Indian Government has been successful in implementing various affordable housing projects in conjunction with the private sector. Currently about 32% of Kenya’s population lives in urban areas, this number is bound to increase significantly with Kenya Country Private Sector Diagnostic (CPSD) Report – 2019 estimating that by 2050, half of Kenya’s population will live in cities. From this report, the target number of individuals for the affordable housing program has been estimated at around 97% of the formally employed population (close to 17 Million individuals or 4 Million households). The provision of the targeted 500,000 affordable housing units by 2022 will definitely go into satisfying a significant portion of the projected demand for housing in the country. The target beneficiaries are Kenyans who are unable to access long-term housing finance. Most local banks have products that are targeted at providing house finance for households that earn above Kes. 100,000 per month. The government is hence targeting households that earn below Kes. 100,000 per month. In a report produced by the SDHUD, the targeted beneficiaries are as indicated in sections 2 – 4 below:

How will It Work?

Once an individual contributes to the housing fund for 6 months and has accumulated 2.5% of the value of the home they wish to purchase, they become eligible for the allocation process. The allocation process relies on a lottery process which is independent and automated with no human interface. There have been concerns over what happens when you contribute and do not get picked. However, our focus is assessing the affordability while taking into consideration the target market. The sizes and price of the houses are represented below:

Once selected, the individual can purchase a unit through mortgages or a national tenants purchase scheme (TPS). The National Housing Corporation (NHC) defines a tenant purchase scheme as a scheme where house allottees occupy the houses and the monthly payments made goes to redeeming the sale price over an agreed period and interest rate. The property in such a scheme is owned by developer until the sale price is fully paid. NHC has been successful in implementing TPS in some of their historical projects.It is important to note that while there is provision for social housing as well, we have focused on the affordable housing category.

Who is this for?

We computed the projected TPS amounts for the different unit components while making two assumptions; that the TPS duration would be 15 years, which mirrors the tenure of most local banks, and that the interest rate is 7% as provided for by Kenya Mortgage Refinance Company (KMRC).

* we have matched the unit components to the assumed targeted household income bracket
**is based on the 28/36 rule that states that a household should spend no more than 28% of its gross (before taxes) monthly income on housing expenses and no more than 36% on total debt. We have assumed that the income bracket is stated gross of taxes and hence we applied 28% on the highest amount on each income bracket. We have worked backwards to find out what the minimum income will be in order to qualify for TPS for the different units

We compared the maximum monthly debt amounts to the estimated TPS amounts to confirm whether the units will be afforded by the targeted groups. From the analysis, it was clear that:

  • Social Housing – this income group mainly contains individuals earning around the minimum wage up to Kes. 14,999 per month. They probably live in a single room or a bedsitter in Kawangware and are paying between Kes. 3,000 – 4,000 per month. The rent coupled with the ever-increasing cost of food and the daily commute expenses has really thinned their disposable income. With little to no amounts to save every month, their priorities would be mostly on getting enough money for rent and food and hence will not be able to pay for the units. The individuals will need to grow their monthly income to a minimum of 21,000 per month in order to qualify for the 1 room and Kes. 33,000 per month for the 2 rooms
  • Affordable Housing (Low Cost – Kes. 15,000 – Kes. 49,999 per month) – the individuals within this bracket are mostly straight from school and have gotten their first job. With this income, they want to move out from their parents’ house and start becoming independent as well as commence the repayment of their HELB loan. Things are tight for them, between impressing their supervisor by doing crazy late hours in the office and catching up with friends from their alma mater. They leave in bedsitters at secure areas close to the office to avoid spending too much on fare and pay between Kes. 8,500 to 15,000 per month. Their priority might not be to own a bedsitter or a 1 bedroom at this point, but to hit the hottest joint in town over the weekends to celebrate the passing of a week with crazy hours in the office. The affordable housing option might be a better option for them compared to renting since they can afford if they squeeze themselves a bit and they end up owning the units. However not everyone within this income bracket can afford the bedsitters and 1 bedroom, only those earning a minimum of Kes. 26,000 per month can qualify for the bedsitters and Kes. 33,000 per month for the 1 bedroom. Further, some of those who can afford it have aspirations and would prefer to buy a 2 or more bedroomed houses to accommodate their families as they move to the next stage of life.
  • Affordable Housing (Mortgage Gap- Kes. 50,000 – Kes. 99,999 per month) – most individuals within this bracket have been working for about 2 – 3 years and have more disposable income compared with the first two levels and can hence afford the units. They live in a one or two bedroom in Jamhuri and Ruaka paying 20,000 to Kes. 35,000 every month. They do not mind spending a few coins on tickets to that latest movie over the weekend and they have a preference for where they would like to live which then raises the issue of location for the affordable housing units as they have to be strategically placed in order to be attractive for this group. The issue of how big the units, the number of parking lots per unit, the designs for the building are all key factors for this group. It is good to note that, if one is within this income bracket, they will need to earn at least Kes. 65,000 every month to qualify for the 2 bedrooms and Kes. 97,000 per month to qualify for the 3 bedrooms.

What does this mean for the Buyers?

While the levy matter is being debated, the World Bank has approved USD. 250 Mio loan to the Kenya Mortgage Refinance Corporation (KMRC), a largely private sector-owned and non-deposit taking financial institution supervised by the Central Bank of Kenya (CBK). The KMRC loan will be used to finance the local banks who will then give mortgages to individuals to finance their units. There are some questions around who will be in-charge of the credit scoring process for TPS buyers, this could be where the banks come in as they already have an existing scoring process for mortgages?

That being said, most Kenyans, especially low and middle income earners, might not have housing as one of their priorities at the moment. “Kung’ang’ana tu! Hakuna kazi”, loosely translated to just struggling since there is no work, is perhaps the most common answer you will get from a Kenyan after asking them how they are doing. In an economy where the cost of living is constantly rising, the key question is whether affordable housing should rank as a top priority at this point. It will remain to be seen whether the system can be implemented within the next 3 years and still deliver 500,000 units before 2022.

This article was written by David Ndung’u, a financial analyst at InVhestia Africa. David has worked on several real estate and energy assignments and is a FAST Standard Certified financial modeller.

Make Your Every Business Decision a Masterpiece

InVhestia Africa and Esham Park celebrated their recently concluded merger on Thursday 14th March. Attended by clients and partners, the launch event highlighted the enhanced capabilities that the combined entity, going by the name InVhestia Africa will offer.

Esham Park is a project finance advisory and consortiums structuring company which was has been in existence for over 10 years working on various projects and adding value to clients across Africa. Over the last 5 years Esham Park has been working closely with InVhestia on several projects executing them successfully.

At the event, Simon Mwacharo Guyo, the Chief Executive Officer of Craftskills Wind Energy Limited shared his journey with Esham Park. “The Esham Park team took me on as a client 9 years ago and walked with me until my passion project reached financial close in December 2018. This level of dedication is hard to find in consultants” said Mr. Guyo. The project he speaks of is the 100MW Kipeto wind power project which is the second largest wind power project in Kenya. The project will have 67 turbines spread on 17 acres of land that will power 40,000 homes. Mr. Guyo highlighted the support of the local community and indicated that the project would be giving a 5% dividend contribution to the Maasai community. Esham Park marketed the opportunity to potential investors, led investor engagements and negotiations and reviewed term sheets and transaction documents.

InVhestia Africa, on the other hand, is a corporate finance advisory, financial modelling training and capital raising company. It has been in existence over the last 7 years during which time has become an industry leader in the area of financial modelling and advisory work related to it across Africa. InVhestia has worked with clients from various sectors such as Financial services, FMCG, Agribusiness and the Energy sector among others.

Presenting the strategic direction of InVhestia going forward, Stephen Gugu, a principal at the firm emphasized, “Our financial modelling and advisory services will form the quality inputs that will make your every decision yield a masterpiece.” The coming together of the two firms will provide clients with fully integrated financial advisory services. The focus will now be three fold, Project and Corporate Finance Advisory, Financial Modelling and Training, and Capital Raising. The team members have a solid track record with over 12 countries of work experience. Some of the team members were recruited through the firm’s social responsibility initiative, the Invhestia Annual Inter-university Competition. At the event, the top students from last years edition were honored and given an opportunity to network with potential employers and mentors. The awarding was given by Antony Maina from Aspen Network of Development Entrepreneurs (ANDE) our 2018 competition partner. InVhestia is dedicated to ensuring you have the quality inputs needed to succeed and grow your business and is committed to growing the talent in the financial sector.

For more information on how you can plug in to the 4th Edition of the competition, reach out to us on

Let’s talk about how to make your every business decision a masterpiece today.