Kenya’s Capital Market Authority (CMA) is cautiously exploring the ‘forced’ strategy to end listing dry spell at the Nairobi Securities Exchange (NSE) but warned it can be counterproductive.
Speaking while unveiling quarterly market soundness report Tuesday, acting chief executive Wyckliffe Shamiah they are studying the pros and cons of such strategy, which is employed by Rwanda and Uganda.
''The forced strategy may work against the very objectives of listing. We will continue with our persuasive means as we look at other ways of helping firms raise capital on a securities exchange,’’ Shamiah said.
Kenya has been toying around with the idea of ‘forced’ listing since 2017 when then Ministry of Mining proposed a law requiring firms investing at least $100 million in Kenya’s mining sector have 24 per cent local shareholding through the stock exchange within three years of operations.
The ministry said the law will allow Kenyans to participate in developing mineral resources by acquiring equity of mining companies and enabling extraction firms to raise capital locally.
Late last year, Uganda directed telecommunication companies operating in the country to list at least 20 per cent of their stocks on the Uganda Securities Exchange by 2021 as a condition to renew operational license.
According to President Yoweri Museveni of Uganda, this directive could help conserve the country’s scarce foreign exchange resources and ensure at least a portion of dividend payouts remain in Uganda.
The Ugandan government is also seeking to improve the reputation of the USE. It has gone six years without a single Initial Public Offering (IPO).
The news saw the country’s currency depreciated against major global currencies as investors panicked.
The Kenyan regulator has in the past seven years rolled out several products aimed at increasing market participation and increase liquidity especially at the NSE, which has recorded low activities in the past three years.
In 2013, the Nairobi bourse launched Growth Enterprise Market Segment (GEMS) to enable small and medium-sized firms to raise substantial initial and ongoing capital, while benefiting from increased profile and liquidity within a regulatory environment designed specifically to meet their needs.
The product, which aimed at ending listing dry spell at NSE, has managed to attract only five firms since then, compared to an annual projection of at least three companies.
These are Atlas, Flame Tree, Home Afrika, Kurwitu, and Nairobi Business Ventures.
In 2017, it introduced the Exchange Traded Fund, which has only sold 12,600 units worth Sh15.8 million.
Last year, it launched the Ibuka accelerator program aimed at growing the visibility, brand recognition and business opportunities among hostee companies.