Bonds are becoming increasingly active in Kenya, and the bond market at the Nairobi Stock Exchange (NSE) is proving a good place to raise medium- to long-term capital. As in most African countries, the bond market is not well developed and has been dominated by government bonds and a few corporate bonds.
According to local press reports, NSE First Vice Chairman Lutaf Kassam said that turnover for the Fixed Income Securities Market Segment (FISMS) increased by over 127% to Sh65 billion ($851 million) for the first six months of this year, compared to Sh28 billion ($366 million) for the comparable period last year. Egypt’s bond turnover is reportedly $4 billion and South Africa’s $2 trillion.
Mr Kasaam is optimistic that this growth would continue, especially if companies realize the potential. The Kenya Government is also keen to boost the bond market. In recent budget submissions, Finance Minister Uhuru Kenyatta reduced withholding tax from 15% to 10% on bonds with at least a 10-year maturity in order to encourage long-term investment. He also announced the reduction of listing fees to encourage more listings.
Kenya’s Capital Markets Authority is also setting up an Over the Counter (OTC) market to improve liquidity as well as strengthening the legal and regulatory environment. CMA Chief Executive Officer Stella Kilonzo is reported as saying: “A Bond Steering Committee to oversee the overall implementation of the establishment of an OTC market for bonds has been meeting in June and it is expected to put in place appropriate structural arrangements for the market for the bonds,” said
The two officials spoke during the listing of the first tranche of the Sh5 billion ($65 mln) CfC Stanbic Bank fixed and floating rate note. The issue had been oversubscribed by 28%, according to a bank Executive Director. It is the first issue the bank has done for itself, but it has done several for others and announced plans to bring four issues valued at Sh17.5 billion ($230 million).