For Online E-newspaper
The East African : Mar 16th 2015
The EastAfrican 38 UNIFIED CAPITAL MARKETS BUSINESS MARCH 14-20,2015 New fund to pay Kenyan cont≥acto≥s By JOHN MBARIA Special Correspondent KENYA HAS established a fund to pay contractors who are jointly building and maintaining roads with the government. With a seed capital of Ksh500 million ($5.6 million), money will be drawn to settle bills by contractors under the Annuity Road Programme when they complete laying the motorways to specifications. “The fund will guarantee Brokers on the trading floor of the Nairobi Securities Exchange. Picture: File Kenya, Rwanda bourses now electronically connected Fou≥ Kenyan companies have al≥eady c≥oss-listed on the Rwanda Secu≥ities Exchange By JAMES ANYANZWA The EastAfrican markets electronically to boost investments between the two countries and as a gesture of commitment to the regional integration of the capital markets. Four Kenyan companies K have cross-listed on the Rwanda Securities Exchange (RSE) in anticipation of booming business between the countries. These are Nation Media Group, Equity Bank, Kenya Commercial Bank and Uchumi Supermarkets. Robert Mathu, the ex- ecutive director of the Capital Markets Authority of Rwanda, said automation of the EAC members’ stock marketsforms a key pillar of the capital markets integration. “The process of integra- tion of East Africa’s capital markets is on course, and it is very encouraging. We are currently working on a project to automate and connect all the five stock exchanges electronically. The integration is at an advanced stage, but the only challenge is that of automation,” Mathu told The EastAfrican. “The decision to automate an exchange is determined by the volume of business, but the key requirement is to connect these markets electronically. Already, Nairobi and enya and Rwanda have connected their stock Kigali’s Central Depository systems have been connected electronically. This means you can buy shares in Nairobi and sell them in Rwanda,” Mr Mathu added. Market intermediaries, on the other hand would be able to offer their services in each of the EAC member states. “All countries in East Af- rica have already reviewed their laws to ensure implementation of the Common Market Protocol,” said Mr Mathu. As part of the process to- wards unified capital markets, a set of 15 directives were adopted by the EAC Council of Ministers in November 2014 and are only waiting for a transposition by the EAC member states. The directives were on takeovers and mergers, investor education and protection, anti-money laundering, securities depositories, conduct of business by licensees, securities exchanges and licensing of market intermediaries. Others are EAC corporate governance on listed companies, public offer of debt securities, public offers on equities, corporate governance for securities market intermedi- “All countries in East Africa have already reviewed their laws.” Robert Mathu, executive director of CMA Rwanda aries, admission to secondary trading, Asset Backed Securities , regional listings on securities markets and collectives Investment schemes. The EAC Common Markets Protocol which became effective on July 1, 2010, prioritizes regionalization of the East African Capital Markets with the aim of providing an opportunity for the growth and deepening of the capital markets in the region to promote economic growth. It is argued that well inte- grated regional markets will allow issuers to tap regional capital market to raise capital required to meet the costs of major infrastructural development and commercial ventures. According to the EAC re- gionalisation strategy for the capital markets the mechanism for integrating the legal and regulatory environment should be through harmonization of national requirements rather than the enactment of a single overarching regime. In this case, harmonisation means the implementation of minimum standards of regulation across all the EAC partner states. Each country will recognise the regulatory regime of other countries through harmonisation of policies and approximation of laws. The regionalisation process has taken into consideration that the EAC capital markets are at different levels of development and that an overarching EAC Community law would only be feasible in the long-term after a high degree of convergence between the MERGER The merger of the capital markets, which is in line with the requirements of the EAC Common Market Protocol, provides for the free movement of capital in the region. It will facilitate the transfer of funds and securities across the EAC borders and ensure firms (issuers) looking for additional capital can access a wider pool of investors. different EAC capital markets has been attained. These harmonised laws are developed in the form of EAC Council of Ministers Directives by Kenya ‘s Capital Markets Authority( CMA), Nairobi Securities Exchange ( NSE) and Central Depository Settlement Corporation (CDSC) together with their peer institutions in the EAC region. The first set of seven EAC Council Directives developed in 2013 was issued by the EAC Council of Ministers on April 28 2014. All the EAC partner states are now in the process of transposing these Directives into their respective national legal frameworks. The second set of eight draft Council Directives, which was subjected to public consultation between June 13 and July 13 2014, is now under consideration for adoption through the EAC structures. A new fund has been created to pay road contractors in Kenya. Picture: File the timely payment of contractors and services,” said a communiqué from the Transport Ministry. The government has also put in place the fund’s operational procedures, including regulations on how it will be managed. It will have an Oversight Committee and Secretariat to oversee its operations. The statement said that the eligibility criteria for projects to qualify for funding under the Road Annuity Programme had been established; the partners will agree on accounting and reporting procedures as provided for under the Public Finance Management Act, Cap 412C. The road annuity de- velopment scheme was launched last July by Kenya President Uhuru Kenyatta. The scheme requires successful contractors to seek ways to finance the construction of roads once they win bids. After construction is done, and government engineers have inspected the roads for compliance and issued certificates of completion, the contractors will be paid. The contractors are fur- ther required to maintain the roads for six years before handing them over to the government. The government plans to use the scheme to construct some 10,000 kilometres of road in a five-year scheme. Bids for the initial 2,000 kilometres were issued and contractors were selected. If successful, this will see Since Independence, Kenya has only put up slightly over 14,000 kilometres of road. The scheme is meant to help overcome budgetary constraints, high unit costs and unexplained escalation in costs that contractors face. These problems have been responsible for debilitating delays, not just in construction but also in payment to the contractor. The scheme will help re- duce corruption, poor workmanship and delays, even as it helps to spur investment in infrastructure. Top government officials have praised the model as an innovation that benefits the taxpayer because it focuses on value for money. “It [the fund]guarantees faster and more efficient construction while reducing administrative costs,” said President Kenyatta at the launch. Kenya has pledged Ksh1.2 trillion ($13.3 billion) to implement the programme over the next 10 years. Last year, Principal Sec- retary John Mosonik said the state will help to secure Ksh40 billion ($448 million) in the current financial year, and that the initiative will eventually mobilise Ksh260 billion ($2.9 billion) from the private sector. When the tenders for the initial 2,000 kilometres were announced and bids made late last year, local contractors cried foul, saying that most of them were locked out by the Ministry which seemed to prefer foreign contractors. When The EastAfrican followed the matter, we found that only the local contractors who had teamed up with foreign companies were successful. But top Ministry officials said most of the local players did not have the capacity to put up roads under the annuity scheme.
Mar 9th 2015
Mar 23rd 2015