John Ngumi: The trillion-shilling dealmaker who once went broke

John Ngumi, who is credited with brokering deals worth more than Sh1 trillion, survived by eating what he caught in Kenya’s financial jungle. 

Those were heady times; mega deals were rolling in, with history placing the current Industrial and Commercial Development Corporation (ICDC) chairman in the thick of things just when Kenya’s capital markets were being carved out.

But away from the glamour of clinching multi-million-shilling deals locally and in some of the world’s leading financial capitals, the first-rate investment banker ironically found himself in unfamiliar territory, racking up debts running into tens of millions of shillings.

The debts would end up making his home the target of auctioneers, who gleefully advertised it in the back pages of two of the leading dailies.  

It was a baffling paradox; on the one hand, he had made a name for himself facilitating multi-billion-shilling deals, boasting some of Africa’s blue-chip firms and governments as his clients, but on the other, personal finance demons tormented him.

“I spent between 1997 and 2000 desperately trying to keep my financial head above water,” he recounted to Financial Standard.

In a revealing interview, Ngumi retraces his 37-year journey to the top, from his student days at the prestigious University of Oxford in the UK to his role in shaping Kenya’s financial markets and his fizzing ambition to win that nearly felled him but later rescued him out of his financial rut.

In 1994, Ngumi alongside four partners birthed the Loita Capital Partners Group that consisted of Loita Asset Management (LAM) and Loita Capital Partners Ltd, looking to create the first indigenous investment bank.

And they did. Between 1994 and 1997, LAM emerged as a big force in Kenya’s capital markets. It helped place the first-ever bond at the Nairobi Securities Exchange (NSE) and exclusively worked with the Central Bank of Kenya (CBK) in structuring a Treasury bond programme.

However, the intoxicating world of investment banking – fast and marked by high risk – didn’t spare Ngumi and his partners; it ended up burning their fingers, badly.

“It’s just that we were incredibly ambitious and our costs would never match our revenues. We were spending like mad, like classic London investment bankers,” said Ngumi of the team of sophisticated high financiers.

Their lives revolved around the world of high finance minus the capital to support their lavish lifestyle.

“We basically started with nothing. We had to eat what we killed whereas proper investment bankers in London are really capitalised,” chuckled Ngumi as he recalled the champagne, fine whiskies, cigars and expensive art collections.

The hedonistic lifestyle synonymous with investment bankers was taking its toll on the business; they worked hard and partied even harder.

“We didn’t lose the art, though,” he told FS of the few remaining paintings that hang on the walls of his office at Eagle Africa Capital Partners Ltd where he’s now an executive director.

The partnership had also birthed LAM, a separate vehicle that quickly became the second-biggest fund manager in Kenya after Barclays Bank’s outfit – Barclays Trust.

It had assets under management (AUM) worth Sh3.8 billion, managing Industrial and Commercial Development Corporation pension funds, while Loita Capital acted as a classic investment bank, raising capital for firms.

The aftermath of Loita’s failure saw Ngumi borrow heavily, eventually sinking into debt.

“We had a staff of about 34, and I felt it was up to me to ensure that I kept paying them until they found other jobs, but it meant I borrowed heavily. I ended up mortgaging my house three times,” recalled Ngumi.

“I paid back. But oh, boy! That was a tough time.”  

Despite the failure, Loita is largely credited with shaping up Kenya’s financial markets.

Back then, the only other asset managers were foreign-owned. They included Barclays Trust and Standard Chartered Investments.

Before giving up the “unequal struggle,” as Ngumi called it, they had opened up space, and well capitalised international players such as Old Mutual would join in for a slice of the market.

“We were too strong for each other in a sense… our partnership ended up in flames. But oh, boy! what a journey!” he said, underscoring the impact of Loita on the market in the wake of their exit.

“I see us like a tree that shot up too quickly and got burned, but the debris and ashes went into the soil and created a whole new architecture for financing,” added Ngumi.

He later reunited with some of his former partners, including Wanjiku Mugane and Jane Muigai-Briggs to form Eagle Africa Capital Partners based in Nairobi’s Westlands.

Ngumi lights up recalling how the name Loita came about.  

“My office in Barclays Plaza overlooked Loita Street. So we were looking for a name in 1994, and there it was,” he recalled.

LAM was a market pioneer in raising funds through the capital markets.

It partly oversaw the placing of the first-ever listed corporate bond issue at the then Nairobi Stock Exchange – the East African Development Bank’s Sh820 million bond.

LAM would also be the first to attract foreign portfolio investors following the liberalisation of the bourse’s controls through the placing of 2.5 per cent of NIC Bank Ltd’s shares with a US investor.

They also raised capital for the Sh1 billion Acacia Fund, Kenya’s first venture capital fund.

LAM also did some of the first black empowerment deals in South Africa, as well as various trade finance-related deals in Malawi and Zimbabwe.

It also created Kenya’s first weekly investment analysis, which is now popular with brokers, according to Ngumi.

Loita Capital was also the financial advisor to scores of top firms, such as East African Breweries Ltd (EABL), Industrial Promotion Services (IPS) and Housing Finance Company of Kenya (HFCK) that has since rebranded to Housing Finance (HF).

In 2000, Ngumi would return to banking following the entrepreneurial misadventures to work in Citibank’s corporate finance unit.

“My boss was somebody I had hired 10 years earlier, so it was a humbling experience,” he recounted.

Ngumi describes himself as “enormously self-confident and possessed with a copious amount of drive and will to win.”

He said rejoining employment enabled him to repay his loans.

“That’s when we did the Safaricom deals and the big bond issues. We really went all out,” said Ngumi. In 2001, he was the sole arranger and joint lead manager of the Sh4 billion Safaricom bond, which at the time was Kenya’s largest-ever corporate bond issue.

After Citibank, he continued with the deal-making at Stanbic, setting up the lender’s East Africa investment unit and capped his dealmaking career at Standard Bank Africa, arranging over $8 billion (Sh864 billion) debt, advisory and capital market deals.

It’s hard to reconcile how he struck the mega deals, yet his personal finances weren’t in order.

At this time, he was the sole private sector representative invited by the National Treasury to help in shaping the Retirement Benefits Authority (RBA), which now controls Sh1.4 trillion AUM and was also part of a team that revised the Capital Markets Authority (CMA) Act.

“The fact that you are battling your own financial demons doesn’t mean that you are not able to work. On the contrary, you have to work to eat,” explained Ngumi.

But how did he became Kenya’s hottest dealmaker? The story begins at St Peter’s College Oxford University where he studied Philosophy, Politics and Economics (PPE), described as the degree that “runs Britain,” with graduates making up a bulk of the country’s ruling elite.

Ngumi, who focused more on politics and economics, graduated with first-class honours.

He explained that the degree tailors graduates to be able to “run anything” or master any task on short notice, especially in government.

“It teaches you to be very quick on the uptake, quick on understanding briefs and also gives a very good ability to weave words together so that you can sell virtually anything,” said the former Kenya Pipeline Company chairman.

And a master seller he is. Despite his lingering stutter, Ngumi is very convincing and has a way with words – key skills needed at the deal-making table.

To him and many others, PPE is a broad approach to learning and one does not necessarily study it with a particular career in mind.

In essence, Oxford and PPE shaped his outlook, fuelled his drive and fed him the dogma of being “born to rule.”

“It really triggered a lot of interests that I’ve maintained. I imbibe some of the kool-aid that says you are meant to rule. It also inspired a lot of curiosity. I didn’t do it for any career reasons,” said Ngumi.

He credits his good educational background with overcoming his personal finance woes.

“It had built a strong sense of capability and destiny, and I never had any doubts that I would build back, and the way that I did was very interesting,” said Ngumi.

After graduation, he got into corporate banking in London as a trainee at the National Westminster Bank for three years.  

He said his interest in investment banking was fuelled by two colourful personalities – Sir Siegmund Warburg and Michael von Clemm –high-end financiers who reshaped world investment banking and grandmasters of the old-style merchant banking tradition.

Ngumi added that the question of why he never stayed in London to chart a banking career there keeps popping up.

“I never really had the urge to work outside Africa. I wasn’t cut off from Kenya. I returned many times and was closely connected. I felt that I could be more effective in this small environment than I could be rising up the ranks in London,” he said.

Born in 1955, the seasoned investment banker’s CV’s opening line reads: “My life’s overriding goal is to see Africa freed from economic hopelessness.” This is through an efficient financial market that he helped shape.

When he returned to Kenya in 1983, a wind of change was blowing across the banking industry previously dominated by the British.

KCB, formerly Grindlays and the largest bank at the time, was expanding. The Americans were also dominant with lenders such as First Chicago and Citibank. So were the Brits with Barclays and Standard Chartered.  

Formative stages

He noted that Grindlays had styled itself as a merchant bank, the key reason he approached them for work. 

Here, they were more involved in traditional banking for the agricultural sector, doing export credit guaranteed financing, mainly to the UK.

He was also part of the team that raised funds for the Kiambere Dam, “one of the last projects done on budget and on time,” according to him.

At Grindlays, they did notable deals on commercial papers for financing the coffee sector.

“Believe it or not, in those days the Coffee Board of Kenya was a viable client. We used to raise $34 million (Sh3.6 billion in today’s exchange rate) in London to be used to make advance payments to farmers here,” recalled Ngumi. His experience in high-end corporate banking saw him tapped by Citibank in 1985 to head a new capital markets unit, which was a start towards investment banking.

However, not many deals were done during that time because the market was in its formative stages.

Citibank foreshadowed his work with the government. His first notable deal was winning the mandate to refinance Kenya’s military debt with the US that was 90 per cent guaranteed by the ministry of defence.

“That was a bond issue we placed in New York (the only bond placed there) in 1989, and while the figure was relatively small at $26 million (Sh2.7 billion in today’s exchange rate) it was quite substantial in those days,” he explained.

In 1989, he joined Barclays as number two in their merchant finance drive to create an investment bank akin to the one they had in London.

Here, the focus was on financing real estate projects through debenture stock issuances.

Some of the notable projects included Nation Centre, Nairobi Shopping Mall, Unga House, Lonrho House and The Windsor.

Ngumi has over the years risen as a key figure in government parastatals and is the immediate former chairman of Kenya Pipeline Company.

Last year, President Uhuru Kenyatta appointed him as chairman of the ICDC board.

ICDC is now set to oversee Kenya’s largest parastatals with assets worth over Sh685 billion and Sh72 billion annual revenue.

This is after operations of State entities, including Kenya Pipeline, Kenya Railways and Kenya Ports Authority (KPA), were brought under ICDC’s control through an outfit called the Kenya Transport and Logistics Network (KLDN).

This is his second stint at ICDC, having served as director for a year and a half in 1997 before he was pushed out.

He was also an initial board member of the Communications Authority of Kenya and the inaugural chair of Konza Technocity Development Authority.

He said his appointment to government agencies is not about being politically connected but is purely on merit, having worked on its syndicated loans and even arranging the Eurobond.

Ngumi terms it a “myth” that he chairs many State entities.

“People make a big song and dance about it. Currently, I only chair ICDC, Wananchi Group, Carepay Kenya and I’m a non-executive director at KQ (Kenya Airways) and the Base Titanium board,” he said.

Ngumi cited his best deal as being the sole arranger of the Sh500 million Faulu Kenya medium-term note issue, the only bond issue for a microfinance in Africa that showed the power of the capital markets even in addressing those viewed as unaddressable.

“What we did is connect the really poor down there with the bond markets. We reduced Faulu’s lending rate from about 38 per cent to under 18 per cent.”