Happy new year people. I hope you are all working on your resolutions and if you do not have any, well join the club. A new year brings with it new things, new aspirations, new realities and new possibilities. This applies to anyone be it a little child, a teenage girl or a man in the throes of his mid-life. It also extends to non-human entities such as companies, schools, universities and countries. With this in mind, I hope to share some of the things that I would like to see happening as well as some of the things that may happen in our financial world.
To start with, I would really like both the Capital Markets Authority (C.M.A) and the Nairobi Stock Exchange (N.S.E) go ahead with the demutualisation of the bourse. It has been a long time coming and could even be longer before this takes place. With demutualisation, the NSE splits ownership and management with the NSE being offered to the public through an I.P.O. Both aforementioned parties have been waxing lyrical over the past couple of years about demutualisation but we are yet to see it happening. Demutualisation would lead to greater transparency that would hopefully lead to increased investor confidence in the market. The confidence reached a nadir with the 2007 post election violence coupled with the Nyaga and Thuo crises. The index subsequently took a nosedive. Confidence is key if the market is to recover. Another benefit that demutualisation may bring is that the NSE may license more stock brokers and hopefully this would bring about a reduction in brokerage fees. Kenyan stock brokers charge excessive fees of about 2-4% per trade. This may sound like pocket change to the layman, but in South Africa typical brokerage fees range from 0.02% to 0.1%. The high brokerage fees make foreign investors and members of the diaspora to shy away from the bourse.
Secondly, I would like to see the powers at be starting from the Attorney General, enforce the Proceeds of Crime and Money Laundering bill 2009. It was a big step for this country when the bill was passed, but if it is not enforced and taken seriously it will be a huge disappointment. I as well as other commentators have speculated in the past that the lack of proper money laundering legislation has been a boon for terrorists and other criminals to "invest" in the country, pushing out locals of the property market. These days house prices are over the moon and sell at extraordinary multiples of our incomes. I dare speculate that if the bill is taken seriously, we could see a reversal in this trend.
Kenya will witness a momentous change this year as the East African Common Market is established. The free movement of people, goods and services should offer Kenyan entrepreneurs bigger markets and more opportunities to thrive. Kenya is well placed to take advantage of this as liquidity right now is very high and we have for a long time had flexible capital mobility regulations vis a vis our neighbours, especially Tanzania. I urge young Kenyan businessmen to strategise for the unification of the East African Market
Finally, and I know it is a long shot, I would like the draft bill to get the right amendments so that Kenya can finally have the constitution that its people deserves. We have suffered for too long and our economy has suffered for too long due to a lack of a proper and well enforced legal framework. I put it to you that the law is the cornerstone of a good working economy. All the maxims of Capitalism are based on a system of property protection that unfortunately Kenya has lacked. The case of the Mau is a perfect example
Hopefully things will go well in regards to the aforementioned aspirations. Feel free to share with me your aspirations for Kenya for 2010.
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- Samora
- Kenyan economic and financial research analyst.
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Just to add on, I hope to see better business and financial reporting from both T.V and print media. No more "the index improved a bit slightly" and quoting wikipedia. If fed up with such news then just come to my blog.
On brokerage fees I think you need to appreciate that those brokers that charge 0.1% make up the difference on volumes. i think its therefore fallacious to argue that kenyan stockbrokers can get away with the same levels, we just don't do the figures that those exchanges do. It would be unsustainable. On a positive note I think most brokers have revised their brokerage fees downwards to about 0.7%-1%, esp for foreign clients so thats a plus.
I agree with you on demutualisation, its a concept that absolutely needs to be applied.
The fact that we don't do those figures does point to the fact that substantial structural changes need to be made. These changes are well beyond the scope of brokerage houses, the NSE, the CMA or even the treasury. However my point is that the high barriers to entry into brokerage do inflate the transaction costs and deter a good number of local investors.
On the NSE, I wish I had a crystal bowl but I don't where it goes is a matter of speculation. Thanks for the comments though.