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The East African : Nov 17th 2014
MONEY AND EQUITY MARKETS NOVEMBER 15-21,2014 REMOVING INVESTMENT CAPS Dar, Nairobi to open up treasuries, firms to full foreign ownership Expe≥ts say move will boost fo≥eign di≥ect investment in East Af≥ica By ALLAN OLINGO The EastAfrican K enya and Tanzania are working on a master plan that will give foreign investors more stake in their respective securities markets. Uganda is way ahead of its East African peers, having no cap on the percentage allowable on ownership of local firms by foreigners. Recently, Tanzania announced plans to allow foreign investors to participate in the purchase of government securities through Treasury and infrastructure bonds without restriction starting 2015, in a move that will help the government borrow cheaply. Bank of Tanzania associate di- rector for domestic markets Paul Maganga said the move will open up the market for competition to the advantage of both the market and government. “We are studying the outcome of the current set-up so that we see the extent of the demand for our government securities from within the EAC. Once we see the outcome, then we will open up to the rest of the world,” Mr Maganga said. Tanzania only allows investors from within the East African Community to purchase up to 40 per cent of offered government securities while individual countries are not allowed to purchase more than two-thirds of the 40 per cent quota. Kenya last week said that it was planning to allow foreign investors to increase their stake in local firms in order to raise the billions of shillings required to jump-start massive infrastructure development. Kenya’s Capital Markets Author- ity said that a new master plan is being developed to allow foreign investors to increase their shareholding up to 100 per cent in certain local companies, up from 75 per cent. The move, according to CMA, will boost foreign direct investment (FDI) by making the capital markets more attractive to foreigners. The World Investment Report 2014 put Kenya’s 2013 FDI inflows at $514 million, up from $259 mil- Da≥ bou≥se to join online payments platfo≥m By HELLEN NACHILONGO Special Correspondent THE DAR es Salaam Stock Exchange is in the final phase of joining the National Payment System (NPS), an efficient customer-centred payment platform that is designed to ease the conduct of business. The NPS minimises payment, clearing and settlement risks, and promotes reliable, secure, cost-effective transaction. DSE’s programmes and projects manager Magabe Maasa said the bourse is working with two banks on the Society for Worldwide Interbank Financial Telecommunication (Swift) system as it awaits approval by the central bank to join the NPS. “The DSE is using the Swift The Nairobi Securities Exchange. Kenya and Tanzania are working on a master plan that will give foreign investors more stake in their respective stockmarkets. Picture: File lion in 2012 — a 98 per cent increase attributed to oil discovery. The report noted that Kenyan companies had been active in investing beyond the country’s borders. “Kenya is developing as a fa- voured business hub, not only for oil and gas exploration in the subregion, but also for industrial production and transport. The country is set to develop further as a regional hub for energy, services and manufacturing over the next decade,” says the report. Uganda has enjoyed higher FDI $1.872b countries allow 100 per cent ownership of local firms by foreign investors. Luke Ombara, acting CMA direc- tor for regulatory policy and strategy, said during a stakeholders briefing that they have a proposal that will allow up to 100 per cent of the shareholding of certain listed companies to be held by foreigners. Foreign ownership limits “We have seen constraints with- Tanzania’s foreign direct investment figures for 2013, the highest in the East African Community inflows. Its 2013 FDI inflows hit $1.146 billion, lower than Tanzania’s $1.872 billion but higher than Kenya’s $514 million. Rwanda and Burundi had FDI flows of $111 million and $7 million respectively. Under Ugandan law, foreigners are allowed to wholly own companies or co-own companies with Ugandans. From Africa, only Morocco, South Africa and Egypt have their securities listed in the Morgan Stanley Capital International (MSCI) index, an indication that these in our market, especially where there are large non-traded blocks held by foreign strategic investors. This has been partly caused by the foreign ownership limits and as the market develops, we want to remove these bottlenecks so as to have a greater impact on the securities market,” Mr Ombara said. Penetration of Kenya’s capital markets by foreigners is currently at 8 per cent, a significant rise from the less than 1 per cent recorded in 1998. The contributions by foreign companies to overall secondary equities trading have grown to between 50 per cent and 70 per cent over the past two years. Data from the CMA shows that foreign investors hold 22.1 per cent of the total number of shares a the Nairobi Securities Exchange-listed companies and account for over 50 per cent of trading activity. If the proposal, which will be considered in the 2015/16 budget becomes law, the NSE will be in- cluded in the MSCI index, which boasts a global following and respect. The MSCI only covers bourses that allow foreigners to hold up to 100 per cent of listed companies. “Through this initiative, listed firms will enjoy greater visibility, especially to international investors through listing on the MSCI. Our current approach is geared towards implementing a risk-based financial regulatory regime, away from imposing minimum capital requirements for stockbrokers and investment banks,” said Mr Ombara. CMA also plans to grow the NSE market capitalisation to $34 billion, up from the current $22 billion, by 2017. The Kenyan capital markets’ absorptive capacity has increased substantially since 2005, with over $40 billion raised from the primary equity and bond market in the past decade. But some analysts say that re- moving the shareholding cap may expose the market to global financial uncertainties. “Our capital controls have worked well for us. It is important for CMA to recognise this and not open up the shareholding to all sectors. They should still have a cap on those companies that have a national interest in order to protect the markets,” said Gerald Ngige, a trader at the NSE. system in conjunction with Akiba Commercial Bank and CRDB,” he said. Rwanda is the only country in East Africa using the NPS, a more advanced system, where all communication and transactions are done through one network. When the NPS is in operation, banks will be able to buy shares for clients and make payments through the system. Investors seeking large amounts of shares will find it easier to buy through the new system instead of the client having to transfer funds through the Swift system and buy the shares in a separate process. The DSE has been pushing for the NPS since 2006, but it its implementation has been delayed by lack of funds. “We expect the Bank of Tanzania to approve the system by December,” Mr Magabe said. The Bank of Tanzania expects to use the system’s efficiency in supplying timely and accurate information on stocks and flow of funds to facilitate faster exchange and settlement of funds and securities in order to reduce floats and improve efficiency in the circulation and transmission of funds. 57 Trading at the Dar bourse. The DSE plans to join an online payments system.
Nov 10th 2014
Nov 24th 2014