Kenya Association of Stockbrokers and Investment Banks
The Nairobi Securities Exchange (NSE) has long been a cornerstone of Kenya’s financial landscape. But a lack of fresh listings in recent years has raised concerns about its stability.
It is therefore important to examine how increased listings can revive the momentum of the NSE and propel the wider economy towards prosperity. Growing listings will trigger a series of events that will benefit both issuers and investors, stimulating capital flows.
Amidst the stagnation in listings, it is crucial to identify and address the barriers that hinder companies from going public. Complex listing requirements, high costs of listing, and long waiting periods often deter potential issuers.
Other reasons are; fear of perceived skeletons coming out of the closet, a lack of awareness of the benefits of listing, apathy towards listing, fear of diluting ownership and, the misconception that only struggling companies should list.
There has also been the allure of private equity as a means of raising capital quickly and easily. By 2022, venture capital (VC) deals accounted for 51 percent of all private sector transactions and 40 percent of disclosed deal value, underscoring the growing importance of VC activity in the region.
The benefits of listing go beyond just market growth; they have a huge impact on economic growth. Going public gives companies access to a broader pool of investors, and enables them to raise capital for expansion, research, innovation and operations. Adding new counters will attract more international investors thereby boosting the liquidity of the NSE.
Succession is also a critical benefit of listing, especially in Kenya where many enterprises are family owned and operated. These businesses mostly usually face imminent collapse from lack of interest or lack of knowledge in running the business.
For investors, private sector listings provide a unique opportunity to invest in reputable household brands, fintech companies, and even start-ups. Studies have shown that most individual investors’ decision-making is positively influenced by their familiarity with corporate brands. It has been argued that investor apathy at the NSE is mostly caused by the lack of familiarity with many of the listed companies.
The recent NSE Connect platform represents a historic milestone for the NSE to transform capital raising for businesses. The innovative platform offers entrepreneurs diverse ways of raising capital without necessarily diluting ownership.
It also provides a do-it-yourself assessment of scoring and evaluating readiness for prospective listing companies. The NSE should use its selling points to attract globally competitive listings.
These could be regulatory frameworks that prioritise investor protection, sensitisation to a growing middle class hungry for investment opportunities, or working together with the government to provide incentives for newly listed companies.
Hopefully, we will see an increase in activity in private sector listings as the economy stabilises and the capital markets push for growth.
The revitalization of private sector listings has great potential to steer the Kenyan economy significantly higher by addressing barriers to listing, adopting innovative listing strategies, and leveraging Kenya’s position as East Africa’s financial capital.
As we navigate the country’s economic recovery, we can seize the opportunity to unlock the full potential of the NSE as a catalyst for growth and prosperity.
The writer is a financial literacy associate at the Kenya Association of Stockbrokers and Investment Banks.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
