Odds on Stocks

Michael Onsando
11 September ,2018

“We are doing these things because, if you look at the budget for this year, revenue- in the best scenario is going to be about 1.3 trillion shillings… on your budget, the first claim to budget interest – 400 billion, salaries close to 500 billion, pensions 100 billion – that’s a trillion. You now have three hundred left, do you transfer to counties or do you finance the current budget for the national government – that is your dilemma.” 

“Perhaps it would be prudent for us to look at our country’s problem as an economic one rather than a political one.” I don’t know where I heard or saw this quote, but it was somewhere over the last fortnight – and it stayed with me. Maybe it’s because somewhere after that we have the 30% fuel tax being implemented, one that will see the price of, well, everything go up.

“On paper, the VAT Act 2013 will increase revenue for the government, but in reality, it will wildly distort the market. The cost of running a Kenyan household has increased exponentially – food, water, electricity and cooking fuel have become very expensive. Since the cost of building materials has also increased, shelter has become costly. Transport is set to become more expensive with the introduction of VAT on passenger vehicles with a capacity of over 25 persons, as well as the impending increase in fuel prices. Since the cost of doing business has increased, unemployment could be a possible consequence as businesses reduce members of staff to cut costs. How will people afford to live with such high prices if they are unemployed?” 

– Brenda Wambui, Death by VAT

There are many metaphors that demonstrate the absurdity of a nation trying to tax its way out of poverty – I will neither bore, nor confuse you with new ones. It becomes particularly stifling to new businesses (already struggling to raise revenue to run whatever business type processes they need to). This means that fewer people are employed – and there’s less money circulating in the economy (wasn’t this what the taxes were supposed to do?)

Somehow, according to PwC, casino betting alone is set to bring in about KES 2.5 billion in this same environment. Sportpesa have annual sponsorships of up to 15 billion shillings, and this is not even counting the several other betting platforms that have come up over the last couple of years. Estimates have the gambling industry in the country at being worth about KES 400 billion.

Walk by any pub over the weekend and you will hear heated debates about odds, probabilities and possible outcomes. Most of the sports betters I spoke to have two or three apps, betting in different combinations to ensure a favourable outcome on the other side of a game – no matter who wins.

“On average each session lasts for about five minutes which translates to an estimated Sh50-200 daily and about Sh5, 000 monthly spend on mobile data alone. “Most gamers will access varied betting platforms at least once a day, to either place a bet or track ongoing matches. This in itself, and not at all associated to any winnings, is a deterrent to many regular gamers,” Ms Gikonyo says.” 

On one hand, gambling is a problem. It often comes paired with substance abuse and mental health issues. A geopoll study showed that Kenyan Youth are betting with higher frequency than any of their African counterparts.

What I see here is a mass of Kenyans, willing to take calculated risks with their disposable (or, non disposable but riskable none the same) income, with the chance of the money generating more – usually over a short period of time.

Perhaps we should look for a way to channel that money to solve our economic problems.

The NYSE trades about 1.46 billion shares every day, and is home to some 2,800 companies ranging from blue chips to new high growth companies. The NSE, on the other hand, is home to 65 companies – and the data on how many shares are traded daily is scarce.

So to say that we have an active bourse might be a slight overstatement.

What’s more, availability of shares has been a long-standing problem on the exchange, with some people complaining about being unable to get the shares they want for days on end. And, in the absence of a market-making player, a large number of sales end up not being actualized.

But this won’t stop us from dreaming. Moving this capital (what was it? 400 bil? We can just move 200) to the exchange would mean companies have a little more wiggle room. Already there are people analyzing the difficulty in buying and trading in the country and coming up with simpler tools in a bid to woo the market. The NSE app automatically connects to your CDS account for easy trading. Abacus doesn’t have in app trading, but is great for staying informed of what is happening, and what might affect your portfolio.

This is not to say that we don’t have a ways to go before real time active trading is a thing (and let’s not even begin to talk about investor security and trust issues that need to be overcome. Rather – it is to look at fuel prices sitting at KES 127 and thinking – perhaps it’s time we tried something different.

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