FEE

NSE investors to pay Sh1,200 annually for trading accounts

The fee to be paid monthly

In Summary
  • According to CDSC, at least 97 per cent of total accounts have been idle for the past two years
  • Kenya has not undertaken a major IPO in over a decade now.
NSE chief executive Geoffrey Odundo monitors daily trading at the Nairobi Bourse/
NSE: NSE chief executive Geoffrey Odundo monitors daily trading at the Nairobi Bourse/
Image: FILE

Investors at the Nairobi Securities Exchange will pay an annual fee of  Sh1,200 or Sh100 monthly to maintain their trading accounts starting July 15. 

The new fee announced by the Central Depository and Settlement Corporation (CDSC) via text messages is likely to push up the cost of stock investment amid reports of low trading activities. 

According to the latest Capital Markets Soundness Report for the period between January and March, market capitalisation at the Nairobi bourse dropped to Sh2.43 trillion compared to Sh2.6 trillion same period last year.

This wiped out Sh176 billion off counters as foreign investors left to invest in high-value offshore ventures abroad.

Even so, CDSC insists that the new fee will help shore up the agency's revenue which has dropped despite high maintenance costs for 1.6 million accounts, with the majority idle. 

“Dear investor, effective July 15, 2022, CDSC will introduce a CDS account maintenance fee of Sh100 per month payable annually,” CDSC said in a text message.

The corporation which facilitates holdings of shares in electronic accounts opened by shareholders and manages the process of transferring shares traded at the Nairobi bourse expects to earn at least Sh1.92 billion annually from the new initiative. 

The corporation's financial statement for the year ended December 31, 2021 shows earned slightly above Sh300 million from managing accounts with maintenance taking up to 60 per cent of the revenue.

CDC's main revenues are earned from transaction levy upon completion of equity and bond transactions in the central depository system increased marginally by three per cent last year to Sh245 million compared toSh238 million earned the previous year.  

It charges each investor 0.08 percent of each transaction plus 0.01 percent for the CDSC guarantee fund.

According to CDSC, at least 97 per cent of total accounts have been idle for the past two years, most of which were opened during the insurance of major Initial Public Offers (IPOs).

''The majority remained muted after Safaricom's IPO of 2008, which brought nearly one million new investors to market and that KenGen in 2006,'' an audit released in February shows. 

''Some people have never touched their accounts since then, and some may have even forgotten who their broker was,'' CDSC chief executive officer Nkoregamba Mwebesa said. 

Kenya has not undertaken a major IPO in over a decade.

The country recorded the worst performance among African countries in terms of initial public offerings (IPO), with its drought of transactions now in its sixth year, according to a new report by a business advisory firm PricewaterhouseCoopers (PwC).

The Africa Capital Markets Watch 2021 report hows that South Africa topped the list with 16 IPOs since 2017 followed by Egypt at 15 and Namibia with four, raising $4.14 billion (Sh472 billion), $1.22 billion (Sh139.7 billion) and $232 million (Sh26.4 billion) respectively.

CDSC has conducted a series of joint investor campaigns with the Capital Markets Authority and the NSE in a bid to ensure that the population seized the multiple investment opportunities. 

The agency spearheaded the mobile-traded government bond M-Akiba which failed to hit the target despite a host of incentives to investors.

The initiative launched in 2017 is expected to raise Sh3.7 billion only managed Sh1 billion.