President William Ruto with (from left standing) governor Johnston Sakaja Nairobi Securities Exchange chairman Kiprono Kittony, Trade CS nominee Moses Kuria and Deputy President Rigathi Gachagua during the bell-ringing ceremony at the bourse on October 11, 2022. PHOTO | PSCU
As the government moves to roll out its rather ambitious plan of floating shares of 10 State corporations on the Nairobi bourse through initial public offerings (IPOs) within a year, it has to choose which ones to take to the market carefully.
Whichever parastatal it settles on should have the right performance profile to get investors excited as was witnessed in the 2005-2011 period with the listing of quality State-owned firms like KenGen and Safaricom.
Safaricom’s IPO in 2008, in particular, reignited interest in the market, unlocking ordinary Kenyan investors and customers to share in the telco’s success as shareholders.
As was the case then, the decision to sell shares in State firms is informed by the need to raise funds to plug a hole in the budget as well as get the Nairobi Securities Exchange (NSE) rolling again. More listings on the NSE will diversify and deepen the capital markets. The bourse has often raised concerns of overexposure to the fortunes of a few counters – especially Safaricom, which has an outsized share of the NSE’s total valuation at no fault of its own – due to the dry spell of quality IPO listings.
So, first on the queue this time around should be the relatively successful parastatals such as Kenya Airports Authority, Kenya Ports Authority and Kenya Pipeline Company.
The privatisation plan comes in a period of market volatility, with foreign investors exiting emerging markets for better returns in western markets due to high-interest rates. The listing of the corporations may signal confidence in the market to the private sector and open the floodgates to new IPOs.
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