Kenya Needs Privatization to Spark Wave of IPOs
Kenya Needs Privatization to Spark Wave of IPOs, Regulator Says
Delays in the privatization of state assets are holding up a potential flood of initial public offerings on the Nairobi Securities Exchange, according to Paul Muthaura, outgoing chief executive officer of the country’s Capital Markets Authority.
The East African nation’s last privatization was in 2008, when the government sold part of its stake in mobile phone company Safaricom Plc, according to data from the regulator. Plans by the government to sell stakes in each of five state-controlled sugar companies have been delayed since 2010, and the planned disposal of shares in eight hotels including the five-star Hotel Intercontinental Nairobi have also stalled.
| Read more |
|---|
|
“When we talk to companies, there is actually no shortage of a pipeline of new listings but they are all waiting for the right time,” Muthaura said in an interview in the Kenyan capital, Nairobi. The regulator’s data indicate that each privatization tends to trigger three to six new listings, he said.
The last IPO by a Kenyan company on the NSE was Deacons East Africa Plc in 2016, according to data compiled by Bloomberg. While at least six companies have indicated since then that they’re planning share sales, none has materialized. Instead, a number of companies have delisted, including National Bank of Kenya Ltd., KenolKobil Plc, Access Kenya Ltd. and CMC Holdings Ltd.
The Kenyan exchange has 73 listed companies, with a combined market capitalization of about $23 billion. Muthaura, who joined the regulator 14 years ago and has served as legal head, director of regulation and strategy and chief executive, is stepping down on Dec. 31.
| Read more |
|---|
|
During Muthaura’s tenure as acting and later permanent CEO of the regulator from 2012, the Kenyan stock exchange was demutualized and it introduced new instruments and processes, including real-estate investment trusts, derivatives, exchange-traded funds, mobile-phone-based trading of treasury bonds, online forex trading, green bonds and short selling.
“Throughout the period, we had a core focus on driving market development and enforcement to support continuous market deepening and diversification,” Muthaura said. “Each of the different products were targeted as responding to a different kind of fundamental need.”
Initiatives in the works include depository notes, margin trading, a recovery board for companies that aren’t adhering to minimum-eligibility requirements or are technically insolvent, trading bonds in foreign currencies, and a commodities exchange.
The NSE All Share Index gained 0.7% on Monday to a six-week high, bringing its advance this year to 18%.
To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net
To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Eric Ombok, Robert Brand
©2019 Bloomberg L.P.