Nairobi Securities Exchange (NSE) officials have applauded three of the measures proposed in Treasury secretary Henry Rotich’s budget statement Thursday.
These are the exemption of shares from Capital Gains Tax (CGT); the plans to introduce mobile-based bond purchases; and the exemption from stamp duty of asset transfers into Real Estate Investment Trusts (REITS) and Asset-Backed Securities.
In a statement released Friday, the NSE says exempting shares from CGT is projected to increase the overall number of shares traded, which is a key attribute that investors look for when investing in a stock market.
“The CGT exemption is also important for the positioning of the new Nairobi International Financial Centre (NIFC) as an attractive and competitive investment destination,” the statement reads.
In place of CGT, the Government has introduced a 0.3 per cent withholding tax on the value of the share transaction.
Mr Geoffrey Odundo, the NSE chief executive, says: “We’ll be looking in greater detail at how the withholding tax will be applied. At a high level, Treasury has given a boost to investors and Kenya’s attractiveness as an investment destination.”
The Treasury Cabinet secretary also committed to the launch of the M-Akiba bond, Kenya’s first mobile-based Treasury bond with a minimum investment level of Sh3,000. NSE has worked with the Capital Markets Authority, Central Bank of Kenya, the Kenya Association of Stockbrokers and Investment Banks, the Central Depository and Settlement Corporation, the Nairobi International Financial Centre Authority, the ICT Authority and the National Treasury on the development of the M-Akiba bond and the roll out of the Treasury Mobile Direct (TMD) platform.
“The M-Akiba bond will enable an entirely new group of investors to access Government debt securities via their phones, which will undoubtedly drive up the national savings rate,” Mr Odundo says.
The exemption of stamp duty on assets being transferred into REITS and Asset-Backed Securities is also predicted to prompt several of these new investment vehicles to list on NSE in 2015/2016.
“We think that the taxation on asset transfers into REITS was slowing up the development of this market,” the NSE boss says. “Now REITS will be welcomed by investors — of all types — looking to get exposure to Kenya’s property market. By taking this step, the Government has clearly identified that this will unlock capital for the development of affordable housing and other critical amenities across the country.”