We journalists are often accused of seeing conspiracy even where there is none. Perhaps this is the reason I read conspiracy in the persistent narrative that local investment firm, TransCentury Ltd, will not manage to pay its debts when they fall due on March 25.
With the price of the stock plummeting precipitously, and with deadline-day for the date when the company must fork out a whopping Sh8 billion to pay bond holders approaching fast, my conspiratorial mind tells me that the forces that want TransCentury taken over by foreigners have created a perfect setting for a take-over of the company by its bond holders.
How else do you explain the fact that despite repeated assurances by the company’s chairman, Mr Zeph Mbugua, that TransCentury will pay bond holders on the due date, all have fallen on deaf years.
The latest bad news fuelling the persistent negative sentiment about the fortunes of the company were reports that market regulator, the Capital Markets Authority, has written to demand proof that the company will be able to pay bond holders on due date.
Negative sentiment has only served to beget more negative sentiment, causing the price of TransCentury’s stock to tumble further.
And as expected, the narrative that TransCentury can’t pay — and that its stock is not worth the while — has turned into a self-fulfilling prophecy that has pushed the stock into an unpredictable downward spiral at the Nairobi Securities Exchange.
We all know that market capitalisation is a good measure of a company’s worth. But in the case of TransCentury, we are learning just how financial markets can be detached from economic reality.
In this country, equity and financial market movements will not tell you everything about the state of economic fundamentals such as productivity, employment and growth.
DEAL WITH THE SITUATION
On Tuesday, I called up Mr Mbugua to get his perspective on how the company intends to deal with the situation.
In a voice oozing deep concern and beaming with confidence in equal measure, he didn’t mince his words: “We will pay. We have never defaulted in 20 years.”
I choose to vote with TransCentury in this critical period because I believe that if this national champion goes to foreign bond holders, it will be Kenya’s loss.
You see, the domestic investors behind TransCentury are a different breed from your rank and file domestic investor.
Most of our investors are risk averse types, fellows content to make money either from tenderpreneurship, flipping overpriced assets —land, property, stocks, bonds and clearing coffee farms to build golf courses.
The TransCentury group represents domestic investors prepared to bear the burden of risk and uncertainty and to bet on the country’s long term growth.
Who said that TransCentury made a mistake when they invested in Rift Valley Railways (RVR)? These are risk takers who took a bet on the long term growth of the transport sector — on the phenomenal growth of container traffic at the port of Mombasa.
MORE DOMESTIC INVESTORS
Yes, the dream did not come through at RVR. But as a country, we have reached a point where we must now look for more domestic investors and champions who are ready to take risk and to bet on the future growth of the country.
They purchased East Africa Cables from Mr Naushad Merali and turned it into the largest manufacturer of power cables in East Africa, with a balance sheet of Sh6.5 billion.
They purchased Tenelec from the Spanish company, ABB, a few years ago and turned it into the biggest manufacturer of transformer units in the region.
Mark you, TransCentury is doing all this in a context where our profit-making companies with huge cash-flows are behaving as if they are unable to deploy capital, preferring to ship it out in paying dividends to shareholders.
Where will durable growth come from in this country when domestic owners of capital are all risk averse?
How I long for the days when policy deliberately supported manufacturers and domestic champions. Personally, I don’t celebrate entities like Naivas, Tuskys, Nakumatt, Thika Mall or even Tatu City and Two Rivers.
The future of this economy depends on risk takers like TransCentury. The market price of the holding company may have collapsed, but this says nothing about the group’s fundamentals.