The new body known is expected to provide technical support to the SMEs in East Africa
It is expected to focus “on pre-listing, listing and post-listing support services”.
The NSE has an existing board for SME listing, which has managed to attract only five listings since 2013.
Regional capital markets regulators under the umbrella of East African Securities Regulatory Authorities (EASRA) have set up a new joint advisory body to help small and medium enterprises (SMEs) raise capital from the public.
The new body known as the Capital Markets Advisory Centre (CMAC) is expected to provide technical support to the SMEs in East Africa that are looking to list on the respective regional stock markets, which have been struggling to attract small firms.
The EASRA said in a statement the new body is expected to focus “on pre-listing, listing and post-listing support services”.
The Nairobi Securities Exchange (NSE) has an existing board for SME listing — the Growth and Enterprise Market Segment (GEMS) — which has managed to attract only five listings since 2013.
“The decision to set up CMAC was made with the recognition that SMEs need to be supported to access alternative forms of long term capital, thereby reducing their dependence on short term bank financing in order to spur their growth and boost employment.
“However, most SMEs in the region cannot afford technical services like legal and corporate restructuring,” said the regional regulators in the statement.
“To ensure the sustainability of CMAC, EASRA members will engage with private equity, accounting and other associations, development partners, academia, think tanks, and civil society organisations. Partners will be called upon to provide advocacy and technical support.”
The EASRA comprises the capital markets authorities of Kenya, Rwanda and Uganda, the Capital Markets and Securities Authority of Tanzania as well as the Bank of the Republic of Burundi.
New listings
The GEMS segment of the NSE was set up with a view of attracting new listings, especially targeting family owned firms which have for years avoided going public fearing loss of control and greater scrutiny.
GEMS has less stringent listing requirements than other market segments, requiring that the firms have Sh10 million in paid up share capital, at least 100,000 issued shares and adequate working capital for at least one year after listing.
To list on the main board, a firm requires to have a minimum paid up share capital of Sh50 million, have net assets worth at least Sh100 million, and have on its books 1,000 shareholders who hold at least 25 per cent of its issued shares.
Despite this leeway for small firms there are few companies that are listed on the GEMS.
It was hoped that with the introduction of this new segment a lot of growing companies that have always struggled to find avenues for raising capital to finance their growth and expansion plans would turn to the NSE for listing.
The Capital Markets Authority (CMA) had outlined in its 10-year master plan that it expected up to five GEMS listings per year from 2013, to bring the number of firms in the segment to 39 by 2023.
Last year, only one firm, Nairobi Business Ventures, subscribed to the market segment, joining Home Afrika, Kurwitu Ventures, Flame Tree Group and Atlas Industries.
In a drive to attract more firms on the segment, the CMA said earlier this year that it would launch a business incubator and accelerator programme to increase listed firms in the Gems.
CMA chief executive Paul Muthaura said the programme would look to connect SMEs with transaction advisers, lawyers, auditors, stockbrokers and investment banks to ease the process of listing.
