News Column

State Is Largest Shareholder As NSE Plans Liberalisation

June 18, 2014

James Waithaka



The State has emerged the largest shareholder of the Nairobi Securities Exchange, with a 10 per cent stake, as the bourse heads for self-listing by September.

The National Treasury and the Investor Compensation Fund, which is operated by the Capital Markets Authority, each hold five per cent while the other 22 entities with stakes in NSE hold four per cent each.

Cabinet Secretary for National Treasury Henry Rotich last Thursday proposed to amend the demutualisation law to reflect the current ownership aspect.

"The demutualisation of the Nairobi Securities Exchange, which has been long overdue, is now nearing completion. In order to ensure finalisation of this important exercise, I propose to amend the law to set the minimum shareholding of the exchange at five (per cent) by the government and the Investor Compensation Fund respectively," Rotich said.

The NSE is at the tail-end of the demutualisation process, which will turn it into a public company listed on the main investment segment, separating its ownership from the management.

Before the amendment the law showed ICF, which is meant to compensate investors in case a broker or dealer collapses, owned 10 per cent while the National Treasury, representing the government, held no stake.

"Originally the government and the ICF were to hold 10 per cent each, but during the value allocation discussions, a recalculation was done to factor some two collapsed entities," Paul Muthaura, the acting Capital Markets Authority's chief executive, said on phone on Monday.

He said the proposed amendment is meant to reflect the final adjustment as the position is presently.

"This is until we conclude the IPO (initial public offering) process. Some entities may then decide to offload some stakes to inject fresh capital or accommodate new investors," Muthaura said.

However, a two per cent stake remains unallotted even with the State's and the 22 entities' holdings totalling 98 per cent are factored.

"The two per cent is not yet allotted and makes part of our authorised share capital that is unissued, meaning the portion unallotted is much more," NSE's chief executive Peter Mwangi said on Monday.

The NSE, which increased its authorised share capital to Sh850 million at an AGM last month, has applied to the CMA for approval to demutualise. It awaits the go-ahead.

"The listing will depend on how soon we get the approval. We have already made an application to the CMA," Mwangi said.

Muthaura said the process will likely be concluded within "the next quarter" commencing July. The fact that some CMA directors have left the board after their terms expired will not affect key processes such as this one, he said.

"We still have quorum. The law is also explicit even in the absence of the chair, and the Act provides for how a chair can be appointed," Muthaura said.

The NSE issued a dividend of Sh2 per share for the year ended December 31, during which it raked in Sh262.8 million in net profit.


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Source: AllAfrica


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