NAIROBI, Kenya, Jul 1 – The Demutualisation of the Nairobi Stock Exchange (NSE) should be complete by the end of this year, the bourse’s Chief Executive Officer said on Wednesday.
Peter Mwangi said a draft policy on the same has been presented to the Cabinet for discussion.
“We are at the stage now where a Cabinet memorandum is to be prepared and once that is approved then the Minister for Finance can send the draft bill to the Attorney General’s chambers,” Mr Mwangi said.
“This is so that the parliamentary draftsmen can go ahead with the job of drafting the act, then it’s presented to Parliament and hopefully the process should be complete in the second half of the year.”
Mr Mwangi explained that the demutualisation process was of high priority to the bourse because it made strategic sense as it would improve business, discipline and governance, while making the NSE a commercially viable entity among other things.
“The idea is to demutualise first and then within the next 12 months list on the Nairobi Stock Exchange,” he said.
Mr Mwangi further announced that plans were underway to automate the bond market.
“We hope to do that by the time the Kengen bond comes to the market. On the government bond side we hope to provide a link between the Central Bank and our central depository system.”
Treasury bonds are currently held in the Central Bank depository system.
Meanwhile, Mr Mwangi expressed pessimism over the recent directive by Finance Minister Uhuru Kenyatta for pension schemes to purchase only government securities and infrastructure bonds issued by public institutions from January.
“It’s difficult to see how these institutions will operationalise this directive since there are all manner of challenges and the issue needs to be clarified,” he said.
Mr Mwangi said the Minister needed to clarify issues like whether the proposal covers investment income and what will happen to projects by these institutions that were being financed from income derived at the bourse.
“Whichever way you look at the directive, it will have a negative effect on these funds, NSE and members of these funds,”Mr Mwangi said.
In 2008, the largest of these funds, the National Social Security Fund (NSSF) estimated that its equity holdings were three percent of the market capitalization at the NSE while it contributed an estimated two to three percent of equity market turnover – Sh 1.95 billion to Sh2.93 billion to the bourse.