Is there any planning happening at your local level?

I once read somewhere that a business that doesn't have a plan is planning to fail and my question today is, is planning really happening at your local level? Infrastructure projects that have the potential to change the livelihoods of many are being implemented all over the country. At the national level there is a plan that guides this plans from my understanding all projects of significant note being implemented at a national level are being guided by vision 2030 but the question is at your local level this is at your county level and constituency level are there plans to take advantage of this projects? As a Kiambu native I will stick to what I know and concentrate on Kiambu. In Kiambu there are three significant projects that have taken and are taking place that are potential game changers if well taken advantage of, these are transformation of Thika road into a superhighway and the eastern and southern bypass. 

Thika and eastern bypass road projects in my opinion have not been well utilized to take advantage of the massive piece of infrastructure that was placed there, all that the roads has done is move the population from Nairobi but there has been no significant transfer of industry from the capital yet all the factors of production that would make the transfer of industry happen are present. And the shocking thing is that people are proud of being the bedroom county of the capital even with the low level of employment that it brings. At the constituency level I have not heard of one single Member of Parliament lobbying for the setting up of industrial parks in Thika or Ruiru not one single county rep lobbying for this to take place. The cost of land in that area now makes it extremely unattractive for industry as compared to other counties such as Machakos who have enough land that they are planning to give it out for free. These projects were done prior to the current crop of elected leaders were in place so they are given the benefit of doubt but the Governor who was then MP for Juja cannot escape blame as to how such massive projects were implemented and he did not even plan as to how he can use them to change the lives of his constituents.

The southern bypass is being implemented and for me it is an acid test for the current crop of leaders that are present so my question to them is are they thinking of how that road can change the lives of their constituents are they looking at how they can move the stopover for trucks from Mlolongo to areas such as Kikuyu or Thogoto and create jobs locally? Or are they looking at how areas such as Ndeiya with land when compared to other areas in Kiambu is relatively cheaper and they can be able to turn them into manufacturing centers? Are they cognizant of the fact that with no middle level colleges even if this were to happen we have  people will have to be shipped in to perform the jobs that should be done by locals and the benefit of such projects will be non-existent?

Aside from the national projects, the projects that are being implemented by the CDF are they analyzed to make sure that the projects that are being implemented have the maximum input into the development of their localities? Of the CDF projects is there a strategic plan as to where they want to see their constituencies by the end of their current term or are we just pursuing projects that will not lift the livelihoods of locals significantly? Is the governor being consistently harassed to announce where they are setting up the business park that they budgeted 300 million for? Are they guiding local businesses such as the abattoirs in Dagoretti to embrace modern technologies and expand and in the case for Dagoretti enabling them to get government contracts and even prepare them for an export market. These are questions that everyone should ask their elected representative to answer. For what use will roads be if they do not create employment? For what use are hospitals and health centers being built if the local population even if healthy has inadequate jobs and can’t feed themselves.  

My challenge to you is demand the answers to these questions from your elected representative from your MP to your county rep

Is diversification a risk reduction fallacy?

It's been awhile since I posted well this has been basically because of the heavy workload that has been there and I recently went back to school to do my CFA and my work load hasn't been any lighter. Nevertheless there has been so much to talk about ranging from the JKIA fire to the announcement of the 5 billion dollars in investments that the president was able to bag in China. Today though I thought of discussing something completely different and that is the concept of diversification.

The concept of diversification is basically a method where investors instead of focusing on a single asset spread their risk on a number of assets the logic here being that by reducing their exposure to a single asset investors have reduced the risk that they are taking on, it is basically not to put all your eggs in a proverbial single basket. So it is this concept I want to challenge today.

Warren Buffett has long held that it is better to hold on to five good assets than holding 50 and personally I agree with this, a quick look at the Forbes 500 billionaires almost 70% of them are entrepreneurs that have turned their businesses into corporate mammoths. With this in mind you can ask yourself that as an investor when analyzing where to put your money, where to keep it and the likes in which scenario would you have a better understanding of what your investment really entails, as an investor in five companies or 50 if we confine ourselves to listed companies?

And even in your own private businesses the concept of diversification has often led to many businesses collapsing because of lack of enough concentration by their over-stretched owners an example would be of two very well off entrepreneurs that I personally know one of them let’s call him George is a large force in the real estate sector with properties valued in the billions and he also owns a three star hotel in his bid to diversify from what he termed his over-reliance on the property for his income decided to venture into selling motor-cycles, he even started an alcohol manufacturing company among many other businesses  with all of them being shut down having accrued tons of debt that he painstakingly cleared by selling some of his real estate holdings, Investor B let us call him Sam had a business that supplied items but when he decided to diversify of the only divestments that he did only the real estate venture was able to hold. His supply business suffering from his lack of concentration and the constant capital withdrawals so that he can be able to finance the other ventures suffered and is no longer the booming business it once was.

In the world of finance where it is very risky to hold one financial asset it would be extremely imprudent to hold one asset unless of course these are government bonds but it would also be extremely imprudent to be holding shares in 20 companies when will you do an analysis on these items when do you know if your asset is collapsing? When can you do very detailed analysis?

 Investment firms have research departments that do careful analysis on their held assets and for the prospective assets they want to invest in full time as an individual you have neither the  freedom to do this nor the financial resources to hire one to be doing this for you. My advice to you is when you invest one thing concentrate on it fully if you are in real estate and want to get into shares put your money with an asset manager who has the time and a research department to get into the nitty gritty, build your real estate and concentrate on it.

In conclusion it is my belief that by diversifying you don't reduce the risk you are taking on but are actually increasing by not allowing yourself to do a proper analysis on your investments and hence increasing the chances of making a bad one.

Kiambu County: An investment analysis

It was in yesterday's Sunday Nation that the governor of Machakos county has already been able to attract 56 billion shillings in investments two months since he took office. Which got me pondering what investments should our county governor be making to make Kiambu county an attractive destination for investments to deal with the high level of youth unemployment that we are currently experiencing. Whereas, Governor Mutua has been able to attract investments using the extremely attractive offer of free land this is an option that Kiambu doesn't have due to its small nature. In economics it is said that three factors of production are land, labor and capital and it is these three factors that theoretically attract investment's we can all agree that Kiambu was not blessed with a lot of land but in terms of labor we have a very young population that is second only to Nairobi in terms of its size and it is this population that the governor has the biggest headache with as a very large segment of this population is unemployed to underline this is the fact that in terms of unemployment according to a document released by the ministry of planning Kiambu is only second to Mandera in terms of unemployment percentage wise a very shocking statistic. In terms of capital Kiambu should be lining up fourth behind Nairobi, Mombasa and Nakuru as though a large segment of the population is unemployed the segment that has a purchasing power is relatively large. So what are the investment options open to the Governor of Kiambu?

THIKA TOWN:
An advantage that Kiambu has over Machakos and many other counties is that it is not starting from a vacuum there was once a vibrant industrial center that is Thika town but recently Thika is tending to become more of a residential area than an industrial town a look at the papers you will see this, this is a  trend that needs to be stopped the key to giving our young men and women jobs does not lie in real estate where although the returns are very high in terms of job creation real estate is not a large scale job creator but manufacturing is. The county government can purchase land en-mass in Thika and put it under a land bank where it can  then on be leased to investors who are concentrated on industrial production an example would be if the county government would buy 5000 acres and lease to each investor one acre, the 5000 investors would then start 5000 factories which in this situation each investor would employ 50 individuals, in this simplistic scenario 250,000 jobs have been created shockingly these are the same job numbers that Konza city is creating. With its proximity to Nairobi and the availability of necessary infrastructure Thika can be Kenya's largest manufacturing centre

THE PEOPLE:
Kiambu county has been blessed with a large population and in my opinion this is the greatest asset that we have as a county not only do we have a large population but we have a large population with an extremely high entrepreneurial spirit and it is in this that most of our investments must go by addressing the issues that businessmen and women face when transacting business and mostly on the issue on the high cost of credit I am not talking of the current scenario where the actual lending is done by the government itself I would suggest setting up a fund where the county government and businesses would contribute funds to guarantee loans, for businesses the amount that will be lent can be marked as per the contribution that the business has contributed.

Next week part 2 of this analysis.

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