Nairobi bourse fails to attract small firms

Saturday June 17 2023

Nairobi Securities Exchange Chairman Kiprono Kittony (L) confers NSE Chief Executive Officer Geoffrey Odundo during the launch of the ESG Report 2021 by Kakuzi Limited at the NSE in Nairobi, Kenya on December 20, 2022. PHOTO | FRANCIS NDERITU | NMG


The Nairobi Securities Exchange (NSE) is facing dimming prospects of small and medium-sized enterprises (SMEs) listing on the bourse after the struggling Kurwitu Ventures applied for delisting, just four years after another firm, Atlas Development Services, collapsed and was delisted by the regulator.

The NSE launched the Growth Enterprise Market Segment (Gems) for SMEs about 10 years ago to allow smaller companies list shares for visibility and price discovery.

However, the trading platform has only attracted six companies in 10 years, signalling the extent of financial constraints facing the stock market as a result of a poorly performing economy and the bear run on the market.

These are Home Afrika Ltd, Flame Tree Holdings, Kurwitu Ventures Ltd, Nairobi Business Ventures, Atlas Development & Support Services and Home Boyz Entertainment

Investors are also jittery about putting money in small companies as governance and financial challenges rocked several listed firms.

Read: A quarter of NSE listed firms have negative working capital


Kenya’s Capital Markets Master Plan (2014 -2023) had a target of three to four new listings on Gems each year – culminating in 16 listings by the end of 2016 and 39 listings by December 2023.

In an earlier Interview with The EastAfrican, the Capital Markets Authority Chief Executive Wycliffe Shamiah acknowledged that the SME segment has not performed to expectations, largely due to a legislation that only allows firms to list shares by way of introduction without raising capital.

Listing conditions

Existing public offers and listing regulations deter small firm from raising share capital at the time of coming to the market. This legislation is currently under review.

“Most companies list when they are raising money but with the Gems, you got listed and then you raise money later when you qualify and that is what we need to change,” said Shamiah.

“We require confidence where people can believe that even when they invest in smaller companies they can still get returns just like in big companies. Secondly, changing the legal framework to allow these companies raise money while listing.”

Currently, CMA is reviewing the Capital Markets (Securities) (Public Offers Listing and Disclosures) Regulations 2002 to address the limitations of the Gems market.

Read: CMA now reviews lock-in time rules

Firms seeking to list on NSE’s main, or alternative investment market segment must have a paid-up capital of Ksh50 million ($359,712) and net assets of Ksh100 million ($719,424.46) It should also have a minimum of 1,000 investors, a minimum free float of 25 percent and should have recorded profit for three years in the last five years.

East African stock exchanges are racing towards establishing investment clinics to help attract companies.

In October 2020, the Rwanda stock Exchange launched the Capital Market Investment Clinic to support SMEs in their preparation for raising capital from the stock market.

The investment clinic adequately prepares companies to raise capital from the exchange by inculcating good corporate governance practices and helping them keep proper books of accounts.