Deputy President William Ruto has urged the Nairobi Securities Exchange (NSE) to come up with plan that will see more firms listed.
He said it was ironical that the NSE is ranked fifth largest in Africa yet only a few number of firms control close to 80 per cent of its activities.
“There must be a problem somewhere. Are there real benefits of listing at the stock exchange? If so, are they attractive enough? Posed Mr Ruto when he met the NSE Board at Karen, Nairobi.
Mr Ruto said there was need for NSE to independently find out if there was “something eroding the real benefits” of a firm being listed at the securities exchange that is keeping potential companies away, adding that perhaps the bar has been set too high for small and medium-sized firms to list.
While appreciating that deeper reforms needed to be done to attract more firms to list at the Exchange, Chief Executive Officer Geoffrey Odundo said that incentives such as the withholding tax on dividends and interest income had done little to bring new players on board.
“The government has done a lot to energise the securities market. However, we have not managed to attract new, large players. The reasons being that some firms are not comfortable with the disclosure requirements, fear of losing control, relatively weak macroeconomic environment and the perception that the cost of listing is a bit high,” said Mr Odundo.
As a result of the lack of appetite to list, the NSE chief executive said that they would be working in partnership with the government to ease the listing requirements. “This will attract more companies in the securities market and therefore minimise the concentration risk that we are facing today where few companies control almost 80 per cent of the activities at the NSE.”
In the new plan, NSE is proposing a new concept that will have an incubators segment and an accelerators segment as it prepares to bring new firms to list. The incubators segment would host firms that are too-important-to-fall and also those with special national interest. The succeeding stage would be the accelerators segment which would be tasked with preparing firms to list at the NSE. Mr Odundo said they are targeting at least 250 firms in this new plan that has been christened the “Rapid Mass Listings” strategy.
“We are going to do this in stages. We will prepare and package all firms that have appetite to be listed. Importantly, there will be minimum compliance requirements,” said Mr Odundo.
Deputy President noted that securities markets are a crucial economic engine but should be exposed to reforms that would make it grow and host even the small and medium-sized enterprises. “NSE has the potential of helping the government and Kenyans realise the Big Four Agenda. But relax the listing requirements. Why require companies to lose a minimum of 30 per cent stake and attract only a handful when you can put the threshold at five per cent and attract 1,000 new firms? Push for such reforms,” said Mr Ruto.