Creating shared securities platform to delay benefits

Investors in the capital markets will not benefit from the East African Community (EAC) market in the short-term

Trading of securities such as shares and bonds across borders will not be realised until next year at the earliest, players say.

Establishing a shared trading platform will take time and harmonising laws is not an overnight affair.

“Regulatory regime is not harmonised in terms of listing, brokerage capital and disclosure requirements for both brokers and listed companies,” says Alex Muiruri, an independent financial analyst.

Tanzanian’s Dar es Salaam Stock Exchange (DSE), for example, limits ownership for individuals to one per cent and corporate bodies to five per cent, meaning that Kenyan firms and individuals would not be able to get bargain stocks of listed companies in the DSE.

Taxes also differ among member states and if the region is to become one, what laws to be used are some of the begging questions.

In Uganda, resident and non-resident companies are charged a 30 per cent tax rate but in Kenya taxation rate is 37.5 per cent for non-resident companies.

Settlement of refunds and dividend cheques is a problem shared by all exchanges, which are seen as disincentives towards common trading.

“The challenge is the ease with which an investor in one of the markets can trade his/her securities in another market, while having his/her securities housed in a depository of the first market,” the East African Securities Exchanges Association said in April.

Banking a dividend cheque denominated in a foreign currency also makes it costly especially small amounts that erode dividend gains.

Creating a platform that would make it easy to cross-trade and settle would create new investment opportunities for Kenyan firms and individuals who have been hard-pressed for choices.

Pension funds and asset managers that have been playing a ping pong between stocks and bonds, but as it flattens out, they are moving towards the equities market.

However, regional investors are able to trade in cross-listed shares such as Equity Bank, Kenya Airways, East Africa Breweries and the KCB.