The implementation of the Capital Market Master Plan (CMMP) which intends to make Nairobi a financial hub received a boost after holding its first meeting. The National Steering Committee (CMMP-SC), chaired by Cabinet Secretary for National Treasury, which spearheads this plan received the first set of key recommendations yesterday.
The launch of the Capital Market Master Plan is intended to inform deliberate efforts into having a comprehensive strategic plan for the Kenyan capital markets. It represents a significant milestone, formulated in collaboration with all stakeholders to chart the development of the capital market for the next ten years.
The membership of the CMMP-SC comprises; the Attorney General; Cabinet Secretary Agriculture, Livestock, and Fisheries; Cabinet Secretary Mining; Governor Central Bank of Kenya; Secretary, National Economic and Social Council; Director General, Communications Authority of Kenya; Chairperson Financial Sector Regulators Forum and the Chief Executive of the Capital Markets Authority.
The raft of recommendations were presented by the Chairman of the CMMP Implementation Committee, who is also the Capital Markets Authority Acting Chief Executive, Mr Paul Muthaura, together with the public and private sector members of the Implementation Committee.
The Steering Committee also received an update on notable CMMP milestones achieved so far including; development of a new Corporate Governance Code for Public Listed Companies and a Stewardship Code for institutional investors; removal of the 75 percent limit for foreign ownership of listed companies; approval of the first REIT seeking to raise sh12.5 billion; licensing the Nairobi Securities Exchange (NSE) to set up a derivatives exchange; demutualization and self-listing of NSE; the introduction of fiscal incentives to support the roll out of REITS and ABS; reduction of the NSE trading participant admission fees from sh250 million to sh25 million to lower barriers to market access; and initiatives to enhance market liquidity through Securities Lending and Borrowing, Margin Trading, and Short-Selling.
To achieve government’s aspiration of growing the economy in line with vision 2030 to a middle income economy, the country needs to grow by at least 10 percent every year. Critical to achieving this high-level growth is availability of capital to fund the range of projects that form part of Vision 2030.
The financial sector must therefore drive a significant increase in investment in Kenya by mobilizing both domestic and international resources. Under the second medium term plan two key flagship projects for the financial services sector have been included namely; the establishment of the Nairobi International Financial Centre and the development and implementation of a Capital Market Master Plan.These projects are mutually reinforcing and each needs to be addressed to ensure a vibrant sector that effectively finances the country’s investment needs for sustainable development.
Mr Muthaura highlighted that some of the key recommendations tabled for consideration include: amendment of the requirements for local shareholding of foreign-owned companies operating in Kenya under the Companies Act; establishment of a National Sharia Advisory Board to support the uptake of the “participatory financing” market products and services by setting out standards for all Sharia products designed in Kenya; expediting the gazettement of the draft consolidated Capital Markets (Derivatives Market), Regulations (2015) and determination of the policy roadmap for the consolidation of the country’s central securities depositories.
The CMMP-SC was also engaged on supporting the early clarification of the model to be adopted in the consolidation of the financial sector regulators to facilitate the implementation of the Vision 2030 ambition of making Nairobi an International Financial Centre and full implementation of the CMMP.
Other recommendations tabled for consideration related to: tax neutrality measures such as exemption of REITs and ABS from Value Added Tax to ensure the tax cost of structured finance is not significantly higher than conventional funding and; facilitating the effective setting up of a spot commodity exchange in Kenya through the extension of CMA’s mandate to regulate spot commodities exchanges across the relevant sectors of the economy such as such Mining, Agriculture and Energy in order to centralize oversight and secure coordination of standards.
The five-fold rationale for developing a Capital Market Master Plan are to:
- Build on recent market reforms to address regulatory and institutional constraints to strengthen market infrastructure, intermediation, oversight and governance standards;
- Stimulate innovation to broaden product and service offerings, deepen market participation and liquidity, and drive transformative economic development;
- Streamline and augment funding for developmental projects under Vision 2030 as well as to provide alternative financing sources for devolution of services;
- Establish the Kenyan capital markets as a centre of excellence and gateway for regional and international capital flows; and
- Reinforce the development of Nairobi as an International Financial Centre.
