NSE hopeful despite delayed key state firms listing

The Nairobi Securities Exchange is hopeful the government will list at least two State-Owned Enterprises in the short-term, amid delays in the government's privation plans.  

Budget strains at the Privatisation Commission and a declined proposal on tax incentives for listing firms, by MPs, have stalled the government’s plans to list the first three firms, more than one year since President William Ruto announced the plan.

In October last year, the President said the government would list at least 10 state firms at the NSE within a period of 12 months to re-awaken the capital market. 

More than one year later, none has been listed as the NSE continues to perform poorly amid a foreign investor flight, which has dented the stocks and market valuation.

Market capitalisation hit a low of Sh1.39 trillion this week, having dropped from Sh1.56 trillion in August and Sh1.49 trillion in September, the latest NSE Monthly Barometer shows, with both the NSE 20 and NSE 25 Share Index affected

The stock market achieved its highest-ever valuation of Sh2.94 trillion in August 2021.

Both NSE and Capital Markets Authority are pushing to end the near-eight years of a listing dry spell at the Nairobi bourse.

The Privatisation Commission has however cited budget constraints saying the National Treasury denied it Sh1.7 billion funding needed to sell the first three parastatals in the current financial year, allocating a paltry Sh175 million.

The funding, according to the Privatisation Commission CEO Joseph Koskey, are meant for costs related to transaction advisory services, including the IPOs, awareness and publicity, campaigns, branding and advertisement for the transaction services.

Floating the first three IPOs is estimated to cost about Sh1.39 billion.

Earlier this year, MPs also turned down a proposal to allow firms listing to enjoy a tax incentive.

Speaking to the Star yesterday, NSE chairman Kiprono Kittony said they remain positive of a first listing within the first quarter of 2024, noting an elaborate report is expected next week.

“We are still hoping at least two will be listed early next year. We are also working with the private sector in collaboration with CMA to have listings at the NSE,” Kittony told the Star on the telephone.

He pegged the investor flight on macroeconomics including the weakening shilling, inflation and high interest rates mainly in the US, which has seen investors shift in search of higher returns.

The government previously earmarked about 26 companies for privatisation.

They include the Kenya Ports Authority and Kenya Pipeline, alongside loss-making lenders, collapsed sugar millers and state hotels that have been run down over the years.

Data analyst Mihr Thakar yesterday however said that the government would have to offer shares at a significant discount, given that the benchmark NSE20 is at “pre-Kibaki” levels currently.

“Financial experts within the relevant government departments may not find such an idea palatable, therefore there is a possibility of maiden privatisation deals through other means, rather than through the bourse,” Thakar said.

In order to boost investor sentiment at the NSE, the government should mull options like lower corporate tax rates for listed entities, lower withholding tax for dividends paid to foreign investors and even exotic options, he added.

Such include allocating funds through NSSF to buy select undervalued shares such as KPLC, in order to boost the share price and trigger wider optimism.