Kenya Bourse Regulator Sees 40 New Exchange Listings by 2025

  • Market capitalization of Nairobi bourse may double in 10 years
  • REITs, Exchange-Traded Funds to offer investors diversity

Kenya’s financial-markets regulator said changes making it cheaper and easier for small- to medium-sized companies to trade publicly may attract as many as four new equity listings a year over the next decade.

New rules aimed at attracting so-called SMEs to the local bourse’s segment for smaller companies may boost the total number of listings on the exchange to more than 100 by 2025, Luke Ombara, acting director of regulatory policy and strategy at the Capital Markets Authority, said in an e-mailed response to questions on Sept. 23.

“Their participation will boost trading considerably,” Ombara said. Over the next decade, total equity-market capitalization is forecast to expand to 4 trillion shillings ($38 billion) from 1.9 trillion shillings, he said.

Incentives including waiving listing fees and removing a requirement that companies be domiciled in Kenya are being offered to encourage more businesses to come to the market, according to the regulator’s masterplan published last year. Smaller companies will only be required to offer a minimum of 15 percent of their share capital, compared with 25 percent for larger corporates, while the minimum number of shareholders is set at 25.

REITs, ETFs

The Nairobi Securities Exchange, which was demutualized a year ago to boost transparency and investor confidence, is increasing the variety of products it offers to lure more investors to the market. Stanlib Kenya, a unit of Johannesburg-based Liberty Holdings Ltd., announced plans this month to offer a Real Estate Investment Trust in Kenya by the end of the year, while the bourse is awaiting approval from the regulator to start live derivatives trading and guidelines have been published for the introduction of exchange-traded funds.

In addition to the main market, the Growth Enterprise Market Segment was introduced in 2013 for businesses with revenue of as much as $10 million annually to cater for SMEs. Four companies have since begun trading on GEMS.

The regulator on Thursday welcomed amendments to the Income Tax Act, approved by President Uhuru Kenyatta earlier this month, which scrapped the capital gains. The changes will encourage the flow of domestic and foreign capital into the economy, it said in an e-mailed statement.

The new law will also allow a company listing shares by introduction to pay corporate tax of 25 percent for five years, which is expected to “spur listing of additional companies on the Nairobi Securities Exchange,” acting Chief Executive Officer Paul Muthaura said in the statement. The tax is below the 30 percent rate paid by resident companies and 37.5 percent by foreign companies pay.

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