Kenya has proposed a raft of measures to attract new listings on the Nairobi Securities Exchange.
The government plans to waive the capital raising and listing fees for small and medium sized firms seeking to sell shares to the public.
Firms seeking to list on the Growth Enterprise Market Segment (GEMS) will pay 0.015 per cent of the issued amount, with the minimum amount set at Ksh50,000 ($500), and a maximum of Ksh250,000 ($2,500).
Firms listing on the GEMS will get a tax amnesty provided that they make full disclosure of their assets and liabilities and commit to paying all their taxes and remaining listed for five years.
According to the proposals issued by the Capital Markets Authority (CMA) a week ago, these firms will also be required to have five per cent of their shares available for trading, graduating to 15 per cent within four years, and be held by at least 25 shareholders within two years of listing.
The proposals are still under consideration by market players including the NSE, stockbrokers and investment banks before they take effect.
Currently, firms seeking to list on GEMS must have 15 per cent of their shares available for trading, which should be be held by at least 25 independent shareholders within three months of listing.
CMA has also proposed that firms seeking to list on the GEMS must have five directors.
The capital markets regulator has also proposed to merge the Main Investment Market Segment (MIMS) and the Alternative Investment Market Segment (AIMS) into a new trading platform to be known as the Main Investment Board (MIB).
This will reduce the trading platforms to only two boards — MIB and GEMS.
The existing listed firms are free to decide on which board to list, although they will be required to retain the listing requirement of the MIMS on the new MIB, with a grace period of two years to comply.
Firms will not be charged any fees to transfer from GEMS to MIB.
Any firm can list on the MIB as long as long as it is registered under the laws of Kenya and has a paid up capital of Ksh50 million ($500,000).
The number of minimum investors for firms seeking to list on the MIB has been reduced from 1,000 to 300.
The firms should have recorded profit for one year over the past five years instead of three-years minimum.
Their net assets have been reduced from Ksh100 million ($1 million) to Ksh50 million ($500,000) while the minimum free float of shares have been reduced from 25 per cent to five per cent.
The 64-year-old NSE has not attracted an initial public offering from a corporate entity since 2008, except its self-listing in 2014.
GEMS, the trading platform for SMEs on the other hand, has only attracted five companies since it was launched in January 2013.
These are Atlas, Flame Tree, Home Afrika, Kurwitu and Nairobi Business Ventures.
Kenya expects to have 27 companies listed on the GEMS by 2020 and 39 by 2023 to realise the country’s aim of becoming an international financial hub.
The poor performance of several listed firms, reduced corporate earnings and the volatility of the stockmarkets have made investors rethink their investment decisions, with some opting to shift money into alternative investments such as government securities with relatively high and stable returns.
The Dar es Salaam Stock Exchange, the Uganda Securities Exchange and the Rwanda Stock Exchange are also struggling to attract SMEs because most family-owned businesses are not ready for strict regulations and public scrutiny.