Nairobi Securities Exchange trading floor. PHOTO | NMG The Nairobi Securities Exchange (NSE) is crying out for new major listings to offer investors more opportunities and diversification.
The bourse’s most successful listing, Safaricom Plc, has rallied to a market capitalisation of Sh1.7 trillion and accounts for 63 percent of total investor wealth.
What this means is that the market now rises and falls with the telco, which holds an outsized portion of the wealth of pensioners, individual and institutional investors.
If Safaricom stumbles for any reason, the negative wealth effects will be devastating. Besides Safaricom, the only other major listed businesses are banks and a few manufacturers — East African Breweries Limited and BAT Kenya.
The government, working together with agencies such as the Capital Markets Authority and the bourse operator, need to develop incentives, including longer tax holidays that will motivate more large companies to go public.
The existing incentives have clearly not been enough to bring credible companies to the market.
Many private firms appear comfortable raising money from high-net-worth individuals, development finance institutions and private equity firms — most of them foreign.
This has locked out ordinary Kenyan investors from booming industries such as technology and payments.
The government itself can help remedy the situation by listing more successful parastatals.
The NSE has asked the government to consider selling significant minority stakes in firms like Kenya Airports Authority, Kenya Ports Authority and Kenya Pipeline Company through initial public offerings.
Safaricom is a model example of a company that allows its customers to share in its success as shareholders.More firms should be encouraged to follow suit.If the bourse is unable to attract new major listings, the implications of Safaricom’s dominance will only get worse.The company, though no fault of its own, will become a systemically important business not only in terms of holding investors’ wealth but also supplying them with critical services including mobile money, voice and data.It is an outcome that policymakers must now seriously seek to remedy.