It’s been two years since a new company listed on the Nairobi Securities Exchange (NSE) and the trend has begun raising eyebrows, even attracting the attention of the Deputy President.
In a recent statement, Deputy President William Ruto addressed the fact that few private companies are listing on the Nairobi Securities Exchange (NSE). He pointed out that government privatisation efforts that brought about listed companies like Safaricom, KCB and KenGen should not be depended on entirely as sources of new listings.
The deputy president instead encouraged the Nairobi Securities Exchange to work together with the Capital Markets Authority to incubate more private firms to meet the requirements for listing on the stock exchange.
According to the 2017 Africa Capital Markets Watch report by PricewaterhouseCoopers (PwC), no company has listed on the NSE in two years from 2016. Furthermore, even the performance of those listed is dismal as four out of 12 companies that listed between 2000 and 2016 were trading below their Initial Public Listing Price (IPO), at the time of the report’s release last year, as reported by the Standard.
Listing on the stock exchange is often seen as a great way to raise additional capital to facilitate the expansion of companies, with a number of the world’s biggest companies; Apple, Microsoft, Amazon etc. transitioning from small start-ups to large multinationals after raising funds through listing in the stock exchange. IPOs were at the heart of the dot-com boom in the nineties, a period that experienced a surge in the establishment of technology-based companies with the hopes of cashing in through listing in the stock exchange.
With the current drought in the NSE, companies have fewer options for raising finance, a situation that the Deputy President reiterated in his address at the launch of the Building African Financial Markets (BAFM) seminar in Nairobi; saying that a wider mix of companies trading in the stock exchange would help drive down the cost of credit as companies seeking to expand would instead raise money at the exchange.
Additionally, at the same forum, Capital Markets Authority CEO Paul Muthaura pointed to the millions flowing in emerging sectors such as gambling, which has been buoyed by technological innovation, he added that innovative products at the NSE could attract the same investors from gambling to the capital markets.
“Institutions that don’t prioritise innovation are ultimately relegated to stunted growth, poor competitiveness and redundancy, “said Mr. Muthaura, calling for innovation in the capital markets.
One of the reasons why companies are not listing in the stock exchange is that once they do so, regulatory requirements like the capital gains tax make it unattractive, some of which, the NSE CEO said are being addressed. “We have a proposal on waivers around taxes not paid in the past, where companies that list on the NSE will commit to start paying after listing,” said Mr Muthaura.