Although there are more than 60 companies on the Nairobi Securities Exchange, which has a total market capitalisation of Sh2.8 trillion ($27.90 billion), the bourse has struggled to attract new listings and daily trading is dominated by a handful of large firms.
Capital Markets Authority chief Paul Muthaura said they were reviewing rules, including requirements for companies to be profitable in three of the past five years before listing and another that fixes standards on debt-to-equity levels.
“Our discussion is very much around identifying large domestic enterprises or regional enterprises that will be looking to tap the market,” he said.
At least 75 per cent of the total capitalisation at the NSE is accounted for by just six of the listed firms, with telecoms giant Safaricom alone accounting for 1.22 trillion shillings, Thomson Reuters data show.
Having a single company that accounts for a large percentage of market capitalisation presents a risk that if anything happens to that company, it will affect the whole market, Muthaura said.
Diffuse risk
More listings of large companies will diffuse that risk, he said.
Muthaura said part of the explanation to companies is that it may be cheaper for them to raise capital by listing their shares than via traditional alternatives, such as financing from banks or private equity.
Public disclosures that will accompany a listing are another factor making some firms reluctant, he added, as they fear putting out such information risks revealing business secrets to their competitors.
Muthaura says the success of Safaricom shows such fears are misplaced.
“We have four mobile network operators, only one listed. And the one listed one is by far the most competitive and growing the most aggressively,” he said.
Muthaura did not name any companies that might be planning Kenyan listings but said an industry masterplan had set targets of at least three or four listings a year for the period to 2023.
Dual listing
East Africa’s richest economy plans a $1 billion dual listing of its state oil company by early 2019, which Muthaura said may serve as a test case for such offerings.
“Government by and large is able to fix issues, change the law if the law needs to be changed, address tax issues, support infrastructure investment, so that then now the ground is very clear for others who want to follow,” he said.
