East Africa’s stockmarkets are no longer favourites of investors seeking to raise capital for growth and expansion.
Initial public offerings, which are usually associated with booming markets, have dried up and analysts say the unwillingness among new companies to offer shares to the public is a ticking time bomb heralding the eventual demise of the exchanges.
The latest developments casts doubt on the future of stockmarket listing in the region with some of the listed counters such as Kenya’s national carrier Kenya Airways considering a delisting option.
The EastAfrican has learnt that stringent market regulations, the high cost of listing, increased disclosure requirements, tough operating environments, falling corporate earnings and trading malpractices such as insider trading and front running of bonds by dealers in Kenya have eroded investor confidence and kept potential issuers away from the stockmarket and bond market.
In addition, local investors who had been active in issuing IPOs have exited most markets in the region, leaving the exchanges in the hands of foreign investor.
Companies are now shifting focus to private equity and private placements to raise capital outside the stockmarket.
“I think to some extent there is a tendency by private firms to shy away from the disclosures required in the market. There is also increased competition from private equity funds, that are offering an alternative source of capital which does not require the kind of public exposures the stockmarkets require,” said Paul Mwai, chairman of the Kenya Association of Stockbrokers and Investments Banks (KASIB).
According to Mr Mwai, who is also the chief executive of AIB Capital, PE funds often exit to other PE funds after five to seven years, adding that incentives should be offered to attract them to the stockmarkets.
“There is a needs for incentives for PE funds to exit into the stockmarket,” he added.
According to Daniel Kuyoh, an independent market analyst, the attractiveness of private equity and debt is driving firms away from the stockmarket adding that the trend is likely to persist until the listing requirements are relaxed.
“Unless there are greater incentives for public listing, companies will continue to seek alternative capital sources, so unless there is a more concerted effort by the stockmarket and regulators to incentivise private companies, they will remain private,” said Mr Kuyoh.
The EastAfrican has also learnt that regulations and tax compliance have become a thorn in the flesh for potential issuers, who fear being on the radar of the taxman after making their books of accounts public.
“There is of concern about regulations and the issue of tax payments,” a source said.
Fund managers at Sanlam Investments East Africa said investors are shifting their focus towards PE investments rather than listed firms amid falling corporate earnings, a deteriorating business environment, declining shareholder wealth and a surge in profit warnings.
Regional exchanges face a scarcity of IPOs largely due to waning investor interest and the reluctance by family-owned businesses to open up their books for public inspection and for fear of stringent regulation.
According to Sanlam, PE investors are looking to put money in key sectors such as financial technology, energy, education, consumer products and services.
“Investor interest in PE suggests increasing appetite for private equity investments, considering the limited opportunity in listed equity markets,” the fund managers said in their investment outlook report for East Africa for 2019.
The Ugandan stockmarket had gone through an IPO drought for six years until August last year when Indian drug-maker Cipla Quality Chemical Industries came to the market to sell 657 million share (an 18 per cent stake) to the public.
Prior to that, the last IPO was in 2012 involving utility firm Umeme.
Rwanda Stock Exchange saw only one IPO in 2017 with the listing of I&M Rwanda.
The bank had to wait for five years before the government offloaded its stake in I&M Rwanda.
Last year, the Bank of Kigali cross-listed on the Nairobi Securities Exchange (NSE), exposing the group to increased capital as well as major international investors who had previously experienced difficulties of obtaining access to the Rwandan market.
In Tanzania the government has removed a ban on foreign investments allowing foreigners to buy shares in telecommunication firms listed on the Dar es Salaam Stock Exchange.
The ban was lifted in 2017 after an IPO by the country’s largest mobile operator Vodacom, failed to attract local investors. Tanzania has enforced a law that requires telecoms operators to float at least 25 per cent of their shares to the public.
In Kenya, the Nairobi Securities Exchange has not attracted an IPO from a corporate entity for more than 10 years, the self-listing of the NSE itself in 2014, while the Growth Enterprise Market Segment (GEMS) market, the trading platform for small and medium-sized firms, has only attracted five companies since it was launched in January 2013.
These are Atlas, Flame Tree, Home Afrika, Kurwitu and Nairobi Business Ventures.
In January this year, a private equity firms AfricInvest and Catalyst Principal Partners jointly acquired a significant minority stake in a second tier Kenyan lender, Prime Bank.
Fanisi Capital has also signed an agreement to sell Kenya’s Hillcrest International Schools to Dubai-based GEMS Education for Ksh2.6 billion ($26 million).
Fanisi owns a 55 per cent stake in the school, with 45 per cent held by businessman Anthony Wahome.
Last year, PE activity was spread across multiple sectors in the region including education, where Fanisi Capital has invested up to Ksh400 million ($4 million) in Kitengela International School.
In Tanzania’s health sector, the emerging markets specialist private equity fund manager LeapFrog Investments has put up undisclosed amount into Pyramid Group, a Tanzania-based medical equipment and pharmaceuticals distributor serving customers across Sub-Saharan Africa.
Meanwhile, Kenyan-based private equity firm Catalyst Principal Partners acquired Kenyan top tier mattress manufacturer Superfoam.
The firm also bought Uganda mattresses maker Euroflex Ltd and Malawian mattress manufacturer Vitafoam.
Public officers above 58 years and with pre-existing conditions told to work from home: The Standard
Head of Public Service Joseph Kinyua. [File, Standard]
In a document from Head of Public Service, Joseph Kinyua new measure have been outlined to curb the bulging spread of covid-19. Public officers with underlying health conditions and those who are over 58 years -a group that experts have classified as most vulnerable to the virus will be required to execute their duties from home.
However, the new rule excluded personnel in the security sector and other critical and essential services.
“All State and public officers with pre-existing medical conditions and/or aged 58 years and above serving in CSG5 (job group ‘S’) and below or their equivalents should forthwith work from home,” read the document,” read the document.
To ensure that those working from home deliver, the Public Service directs that there be clear assignments and targets tasked for the period designated and a clear reporting line to monitor and review work done.
SEE ALSO: Thinking inside the cardboard box for post-lockdown work stations
Others measures outlined in the document include the provision of personal protective equipment to staff, provision of sanitizers and access to washing facilities fitted with soap and water, temperature checks for all staff and clients entering public offices regular fumigation of office premises and vehicles and minimizing of visitors except by prior appointments.
Officers who contract the virus and come back to work after quarantine or isolation period will be required to follow specific directives such as obtaining clearance from the isolation facility certified by the designated persons indicating that the public officer is free and safe from Covid-19. The officer will also be required to stay away from duty station for a period of seven days after the date of medical certification.
“The period a public officer spends in quarantine or isolation due to Covid-19, shall be treated as sick leave and shall be subject to the Provisions of the Human Resource Policy and procedures Manual for the Public Service(May,2016),” read the document.
The service has also made discrimination and stigmatization an offence and has guaranteed those affected with the virus to receive adequate access to mental health and psychosocial supported offered by the government.
The new directives targeting the Public Services come at a time when Kenyans have increasingly shown lack of strict observance of the issued guidelines even as the number of positive Covid-19 cases skyrocket to 13,771 and leaving 238 dead as of today.
SEE ALSO: Working from home could be blessing in disguise for persons with disabilities
Principal Secretaries/ Accounting Officers will be personally responsible for effective enforcement and compliance of the current guidelines and any future directives issued to mitigate the spread of Covid-19.
Uhuru convenes summit to review rising Covid-19 cases: The Standard
President Uhuru Kenyatta (pictured) will on Friday, July 24, meet governors following the ballooning Covid-19 infections in recent days.
The session will among other things review the efficacy of the containment measures in place and review the impact of the phased easing of the restrictions, State House said in a statement.
This story is being updated.
SEE ALSO: Sakaja resigns from Covid-19 Senate committee, in court tomorrow
Drastic life changes affecting mental health
Kenya has been ranked 6th among African countries with the highest cases of depression, this has triggered anxiety by the World Health Organization (WHO), with 1.9 million people suffering from a form of mental conditions such as depression, substance abuse.
Globally, one in four people is affected by mental or neurological disorders at some point in their lives, this is according to the WHO.
Currently, around 450 million people suffer from such conditions, placing mental disorders among the leading causes of ill-health and disability worldwide.
The pandemic has also been known to cause significant distress, mostly affecting the state of one’s mental well-being.
Get breaking news on your Mobile as-it-happens. SMS ‘NEWS’ to 20153
With the spread of the COVID-19 pandemic attributed to the novel Coronavirus disease, millions have been affected globally with over 14 million infections and half a million deaths as to date. This has brought about uncertainty coupled with difficult situations, including job loss and the risk of contracting the deadly virus.
In Kenya the first Coronavirus case was reported in Nairobi by the Ministry of Health on the 12th March 2020. It was not until the government put in place precautionary measures including a curfew and lockdown (the latter having being lifted) due to an increase in the number of infections that people began feeling its effect both economically and socially.
A study by Dr. Habil Otanga, a Lecturer at the University of Nairobi, Department of Psychology says that such measures can in turn lead to surge in mental related illnesses including depression, feelings of confusion, anger and fear, and even substance abuse. It also brings with it a sense of boredom, loneliness, anger, isolation and frustration. In the post-quarantine/isolation period, loss of employment due to the depressed economy and the stigma around the disease are also likely to lead to mental health problems.
The Kenya National Bureau of Statistics (KNBS) states that at least 300,000 Kenyans have lost their jobs due to the Coronavirus pandemic between the period of January and March this year.
KNBC noted that the number of employed Kenyans plunged to 17.8 million as of March from 18.1 million people as compared to last year in December. The Report states that the unemployment rate in Kenya stands at 13.7 per cent as of March this year while it stood 12.4 per cent in December 2019.
Mama T (not her real name) is among millions of Kenyans who have been affected by containment measures put in place to curb the spread of the virus, either by losing their source of income or having to work under tough guidelines put in place by the MOH.
As young mother and an event organizer, she has found it hard to explain to her children why they cannot go to school or socialize freely with their peers as before.
“Sometimes it gets difficult as they do not understand what is happening due to their age, this at times becomes hard on me as they often think I am punishing them,”
Her contract was put on hold as no event or public gatherings can take place due to the pandemic. This has brought other challenges along with it, as she has to find means of fending for her family expenditures that including rent and food.
“I often wake up in the middle of the night with worries about my next move as the pandemic does not exhibit any signs of easing up,” she says. She adds that she has been forced to sort for manual jobs to keep her family afloat.
Ms. Mary Wahome, a Counseling Psychologist and Programs Director at ‘The Reason to Hope,’ in Karen, Nairobi says that such kind of drastic life changes have an adverse effect on one’s mental status including their family members and if not addressed early can lead to depression among other issues.
“We have had cases of people indulging in substance abuse to deal with the uncertainty and stress brought about by the pandemic, this in turn leads to dependence and also domestic abuse,”
Sam Njoroge , a waiter at a local hotel in Kiambu, has found himself indulging in substance abuse due to challenges he is facing after the hotel he was working in was closed down as it has not yet met the standards required by the MOH to open.
“My day starts at 6am where I go to a local pub, here I can get a drink for as little as Sh30, It makes me suppress the frustration I feel.” he says.
Sam is among the many who have found themselves in the same predicament and resulted to substance abuse finding ways to beat strict measures put in place by the government on the sale of alcohol so as to cope.
Mary says, situations like Sam’s are dangerous and if not addressed early can lead to serious complications, including addiction and dependency, violent behavior and also early death due to health complications.
She has, however, lauded the government for encouraging mental wellness and also launching the Psychological First Aid (PFA) guide in the wake of the virus putting emphasis on the three action principal of look, listen and link. “When we follow this it will be easy to identify an individual in distress and also offer assistance”.
Mary has urged anyone feeling the weight of the virus taking a toll on them not to hesitate but look for someone to talk to.
“You should not only seek help from a specialist but also talk to a friend, let them know what you are undergoing and how you feel, this will help ease their emotional stress and also find ways of dealing with the situation they are facing,” She added
Mary continued to stress on the need to perform frequent body exercises as a form of stress relief, reading and also taking advantage of this unfortunate COVID-19 period to engage in hobbies and talent development.
“Let people take this as an opportunity to kip fit, get in touch with one’s inner self and also engage in reading that would help expand their knowledge.