The Kenya Association of Stock Brokers (KASIB) has appealed to President William Ruto’s Government to consider using the Nairobi Securities Exchange (NSE) to raise affordable cash for public projects.
In a letter signed by Donald Wangunyu, Chairman of the powerful lobby group, KASIB said the Government can raise funds to the tune of KSh 621.25 billion from the NSE within a year and another KSh 171.36 billion in the medium-term period, bringing the total to KSh 791.61 billion at the end of a three-year period.
KASIB says the Nairobi Bourse is the best choice the Government can use to raise alternative sources of funds to manage its public debt and finance public projects.
In its analysis, KASIB of the 47 new lPOs and subsequent listings on the NSE between 1984 and 2007 that raised KSh 50 billion.
lPOs by State Owned Enterprises were oversubscribed and generated significant interest in the market, thus attracting a good number of private companies. The dividend yield received by the Government in a number of the listed companies over the last 5 to 10 years generated a lower return than the weighted average for the 364 T-Bill.
The lobby thus says that raising Ksh 792.51 billion which is equivalent to 7.07% of Kenya’s GDP will enable the Government to also better manage its fiscal deficit.
As at March 2O21, KASIB made submissions to National Treasury that it considers raising funds to bridge the budget deficit through further divestiture of publicly listed companies as well as privatization of a number of loss making state-owned enterprises.
The Government is expected to offload significant stakes in several state-owned companies, especially now that the long awaited Privatization Commission Board has been fully constituted, removing the final roadblocks to the State’s privatization agenda.
On the list of state enterprises that are ripe for privatization include Kenya Pipeline Corporation (KPC),where the Government could raise KSh 43 billion by offloading a 40% stake.
KASIB in key recommendations also proposes that the Government can also income and derivative Real Estate Invest Trusts(REITS) worth KSh 5 billion within a year to enable potential buyers, especially civil servants, to own their own houses.
The Government can also offload a further 10 percent of its stake in Safaricom and raise KSh 150 million, another 10% in KCB worth KSh 15 billion, 30% in KenGen worth KSh 12 billion and issue a full 60 % stake in Kenya Reinsurance thereby raising in excess of KSh 5 billion.
The new administration can also consider issuing a 40% stake in National Housing Corporation worth KSh 4.72 billion, issue a medium term note to raise KSh 33 billion for state-owned Kenya Mortgage Refinance Company(KMRC), issue a D-REIT to take advantage of its large land bank or issue a medium term note to raise KSh 11.4 billion.
KASIB is also petitioning the new Government to consider issuing a green bond worth KSh 200 million within the next three years for funding of roads and railway infrastructure and KSh 35.7 billion to fund operations of Kenya Roads Board.
The State also has the option of issuing sovereign green and infrastructure bonds worth KSh 180.6 billion for water, sanitation and irrigation projects.
Also earmarked for privatization is Kenya Ports Authority where the Government could raise KSh 33.97 billion by offloading a 40 percent stake in the Authority and KSh 400 billion by selling off a 40% stake in Kenya Airports Authority(KAA).
KASIB also proposes the Government floats a 40% stake in Kenya Electricity and Transmission Co KETRACO, Geothermal Development Corporation(GDC) and National Oil Corporation, to raise KSh 44.75 billion, KSh 27.69 billion and KSh 5.60 billion respectively and still retain control at 60% for these strategic state-owned enterprises.
In its proposals to President William Ruto, KASIB warns that for Kenya to attract substantial institutional investment, it must move from its Frontier Market Status to Emerging Market Status as assessed by the Morgan Stanley Capital international (MSCI) Global Market Accessibility Review.
MSCI is an investment research firm that provides stock indexes, portfolio risk and performance analytics, and governance tools to institutional investors and hedge funds globally.
KASIB is lobbying for the appointment of a Principal Taskforce chaired by the Cabinet Secretary – National Treasury, Permanent Secretary – National Treasury, Director General and Chief Executives of the NSE, CMA, KASIB and PC to implement its proposals its herein and periodically report to the Office of the President.
It is also urging for a joint-training and sensitization of all potential parties to public issuances by the GOEs including transaction advisors, market intermediaries, issuers, NSE, CDSC, company registrars etc. and specifically training and sensitization of GOEs on market-based financing options, lessons learnt, etc.
Engagement of transaction advisors, development of prospectus, legal and financial consultants, valuation experts, marketing agencies, development of issuance timetable(s) and formal application to the CMA for approval to issue and approval and launch of lPO, Debt Offers to the Public and capital raising.
