Kenya’s President Uhuru Kenyatta has approved the formation of the Nairobi Financial Centre Authority (NFCA) through an executive order, as part of a plan to position the country’s capital as a key financial hub.
The draft law, signed by the president and seen by The EastAfrican, gives the NFCA the power to license companies that will operate under the centre, and come up with relevant legal, regulatory and institutional checks to actualise the centre, launched in December last year.
The Nairobi Financial Centre will be headed by a CEO, appointed by the board, who must have at least 12 years’ experience in senior management and a master’s degree in international finance, financial markets, investment or economics.
Finance Secretary Henry Rotich told The EastAfrican that the new body will be tasked with formulating and implementing policies to accelerate the creation of the financial centre.
“We have appointed an interim secretariat to be based at the Treasury... the authority will come up with the policies to guide the creation; consultations both locally and internationally are ongoing,” said Mr Rotich.
Over the past three years, Kenya has been moving to position its capital on the global financial map, establishing the Nairobi arbitration centre, applying to be allowed to host a yuan clearing house as well as signing a series of double taxation agreements with other countries.
“A financial hub will bring about a well-functioning financial system and thereby ease the flow of capital and investments. There will be an element of increased competition in the financial sector and as such improved services and diversity in product offering. The cost of doing transactions will ease, positioning the country as a more attractive global investment hub,” said Roy Akala, KCB director of operations.
Major financial hubs such as Mauritius and London have globally respected arbitration centres on top of extensive double taxation agreements with other countries. The Nairobi financial centre has signed double taxation agreements with Nigeria, Mauritius and Qatar.
The country wants to leverage on its position as a regional services hub for transportation, tourism and financial services to position itself as the gateway for capital into the EAC region and Africa as a whole.
Mr Akala, however, cautioned that the regulatory environment needs to be strengthened if Nairobi is to become a key financial hub.
“There must be tax and regulatory incentives to financial sector players. There has to be an assured stable political and security situation. The infrastructure environment has to be up to speed to allow for ease of doing business,” he said.
On the hosting of a clearing house for the yuan, Kenya has approached China with a proposal.
“We only developed a proposal... the modalities on how it can be done depend on the Chinese government,” Central Bank Governor Njuguna Ndung’u told The EastAfrican in an earlier interview.
Singapore was last year picked as the first regional financial centre outside China to have a yuan clearing house, with several other cities, including London, Frankfurt and Luxembourg pursuing the opportunity to host offshore yuan clearing banks.
If Kenya’s wish is granted, it will be the first yuan clearing house in Africa, a big win for the country. It will enable trade deals and allow the country to receive aid in the currency.
The country is negotiating for an MoU with the City of London, the independent body promoting UK-wide financial and related professional services, that will see the latter help attract companies and assist in developing the regulatory environment.
The national steering committee, tasked with spearheading the creation of an International Financial Centre in Kenya has delegated the co-ordination of the engagement with TheCityUK to the Capital Markets Authority in conjunction with the Principal Secretary to the National Treasury, who chairs the Committee.
“The Capital Markets Authority is awaiting further guidance from the steering committee on the content of the Memorandum of Understanding,” said Antony Mwangi, CMA head of corporate affairs.