Kenyan players in the capital markets sector have partnered to boost product uptake and listings at the Nairobi Securities Exchange (NSE). The partnership aims to achieve the objectives of the 10-year Capital Market Master Plan (2014-2023).
The partnerships comprises of the National Treasury, the Capital Markets Authority (CMA), NSE, Central Depository and Settlement Corporation (CDSC), the Fund Managers Association (FMA), the Kenya Association of Stockbrokers and Investment Banks (KASIB), licensed market intermediaries, and the East African Venture Capital Association.
CMA chief executive Paul Muthaura said:
“The Capital Market Master Plan set down a clear target of achieving 3-4 GEMS listing annually but this target has not been achieved despite concerted industry efforts. New products have also been introduced with low uptake wtinessed. We have agreed to come together as an industry to inform a refined strategy benefiting from broad ownership of all stakeholders to ensure that the value proposition of listing on the NSE and new capital markets products is well packaged to meet the expectations of issuers and investors.”
Low Capital Markets Product and Listings Uptake
The partnership comes after a study conducted by the CMA in April to June 2018 showed that there has been a low uptake of capital markets products and listings and the NSE proposal to execute a Rapid Mass Visibilities Strategy.
The factors causing the low uptake include unwillingness to implement innovative measures to attract companies to list, harsh macroeconomic environment, absence of a simplified product development, perception that other regulatory barriers still override the relatively lower cost of raising funds through the capital markets compared with bank lending rates, lack of a clear action plan towards compensating bond investors whose money is still held in Chase and Imperial banks, competition from other investments offering fast returns, and the risk of issuers putting their reputation on the line after professional valuation.
NSE chief executive Geoffrey Odundo said: “The proposed Rapid Mass Visibilities Strategy seeks to introduce an Incubator Board designed to attract entities with a visibility status that may have multiple stakeholder benefits. It is expected that this Board shall host those entities that require restructuring in terms of financial, technical, operational, commercial, strategic, governance, environmental, legal, compliance, policies, procedures and other aspects to move them to the Accelerator Board. This visibility allows capital market stakeholders to engage with the hosted entity for mutually beneficial business purposes.”
The First Roundtable Workshop
The capital market players convened at a workshop on June 29, 2018, where they discussed the solutions for low product uptake and listings. The recommendations made during the meeting include engaging potential issuers of new products face-to-face, reviewing the integrity, transparency, and governance of product valuation, and improving product development among others.
“Further areas for discussion include how to tap into the private-equity space, certainty around applicability of tax-incentives to the industry and the role of licensed market intermediaries in driving product uptake,” CMA, KASIB and NSE stated on a joint press release.
More workshops will be held in the next quarter of 2018 to guide the implementation of business unusual solutions while CMA, KASIB, and the NSE work towards polishing the above recommendations, which will be considered at a joint board of directors meeting for adoption.
