Kenya to allow foreign investors to acquire 100 pct of listed firms

November 7, 2014


Kenya’s financial market regulator said on Thursday that it will allow foreign investors to acquire 100 percent of certain listed companies, up from the current 75 percent by the end of 2016.

Capital Markets Authority (CMA) Acting Director of Regulatory and Policy Strategy Luke Ombara told journalists in Nairobi that the move is part of efforts to make Kenya an International Finance Center.

“It will also allow the Nairobi Security Exchange (NSE) to be listed on the Morgan Stanley Capital International (MSCI) Market Index,” Ombara said during a roundtable meeting to discuss 2015/ 2016 policy proposals on capital markets development.

“We are cognizant of the risks of allowing 100 percent ownership of local firms by foreigners and so we will limit the sectors where this can happen,” he said.

According to the CMA, the aggregate shareholding of foreign investors has risen from eight percent in 2008 to more than 21 percent presently.

“The non-Kenyan contribution to overall secondary equities trading has averaged between 50 percent and 70 percent over the past two years,” he said.

Ombara said that Kenya’s visibility to international investors will be significantly raised by listing on the MSCI. “Our short term goal is for NSE’s market capitalization to grow from the current 22 billion U.S. dollars to 34 billion dollars in the next three years,” he said, adding that Kenya is moving towards a implementing a risk-based financial regulatory regime, away from imposing minimum capital requirements for stock brokers and investment banks.

The director said Kenya is also making the NSE more attractive to small and medium enterprises (SMEs). “We have relaxed the rules for listing by SME’s in order to expand the sector that is responsible for 50 percent of Kenya’s Gross Domestic Product,” he said.

CMA Acting CEO Paul Muthaura said the newly developed Capital Markets Masterplan is one of Kenya’s flagship projects under the second Medium Term Plan.

He said over the past decade, more than 40 policy incentives have been granted to the capital markets.”We can attest to the fact that the incentives so far granted have achieved a lot in terms of taking our market to the current high levels,” Muthaura said.

Regulator noted that the Kenyan capital markets’ absorptive capacity has also increased substantially, with over 40 billion dollars having been raised from the primary equity and bond market in the last ten years.

The East African nation’s capital markets now have 14 categories of licensees totaling more than 110 in number.Muthaura said the capital markets penetration is currently between five and eight percent, a significant rise from the five percent witnessed 15 years ago. Source: Bloomberg