By Anonymous
I introduce myself as an employee of a Kenyan Share Registrar's office and make reference to the "Daily Nation" editorial of 17th April 1999, titled "CAPITAL MARKETS NEED LAWS QUICKLY", which dwelt on certain issues affecting the Kenyan capital market. As one fairly well versed in the area of securities, I take the opportunity to point out certain crucial issues in the Kenyan capital market, which were not addressed by the editorial.

One of the points addressed in the editorial, was the anticipated introduction of the Central Depository System (CDS), in the Kenyan market, which will drastically streamline share transactions. In this regard, the Capital Markets Authority (CMA), and the Nairobi Stock Exchange (NSE), are applying pressure on parliament to enact the CDS as law. However no sufficient effort/s have been made to enlighten the public on the workings of the CDS and what it portends for this country. This is in a market where many shareholders of long standing cannot differentiate between a share certificate and a dividend cheque. What is even more worrying is that some of these shareholders are educated people with responsible positions in society. A lot of precious time is spent daily on educating shareholders on such basic matters, time that would certainly be far better utilised. Indeed, the progress of the Kenyan capital market has been grossly hampered by such glaring shortfalls, and in this regard , all parties concerned are to blame.

Whether CDS is implemented or not, the Kenyan capital market needs to be revamped to make it much more vibrant, and much more attractive to investors and speculators. There must be a concerted campaign by the CMA, the NSE, brokerage firms, and publicly listed companies, to market the capital market to a wide cross-section of Kenyans. The public needs to be made aware of the different products available in the capital market, and how suitably to invest in these products:-
The majority of Kenyans who have a stake in the Kenyan capital market, are ordinary shareholders of publicly quoted companies. They play a largely dormant role, and largely appear at annual general meetings where they for the most part, play a passive role. This must change to fit in with changing global economic trends. In this competitive times the role of the shareholder must change with changing company structures, and changing market conditions. As a manager and/or director of any company in these times of global liberalisation, my primary interest would be to have shareholders who back the company I manage to the hilt. I would expect them to support the company in terms of ideas, marketing, expansion and constructive criticism. In this way, all parties concerned will wind up gaining. I do not or would not expect to only interact with shareholders once a year at annual general meetings. Practically all companies quoted on the Nairobi Stock Exchange, are guilty of this. For instance, as manager / director of Kenya Breweries Limited, I would expect the shareholders of the firm to actively promote company objectives and products all year round to ensure the success of the corporation.

To achieve this companies must move towards developing a lasting rapport with their shareholders. Instead of having just one annual general meeting, open days / seminars / informal gatherings, should be held as frequently as possible, in which management / directors, and shareholders, interact. This is certainly of mutual benefit. Shareholders can be enlightened on company objectives and sensitised on their role in meeting these objectives (inspite of the fact that share ownership in Kenya dates back to the 1950s, this is an area that is still unclear to the majority of shareholders). Shareholding matters, and indeed the operations of the entire capital market must be geared towards dynamism and vibrancy.

The potential in the Kenyan capital market is far from being fully utilised. There is a lot of un-invested capital that could be tapped into the capital market either by long term investors or speculators. The industry has a collective responsibility of taking the capital market to the people by way of persistent informative campaigns / advertising. All media channels available must be exhaustively utilised, and in particular the Kenya Broadcasting Corporation (KBC), the British Broadcasting Corporation (BBC), and Deutsche Welle (DW), because these are accessible to the majority of Kenyans.

As mentioned above, the CMA and NSE, are determined to see the CDS implemented. The recent NSE sponsored one day seminar for parliamentarians, is one such example of this determination. CDS or no CDS, the central issue is that the Kenyan capital market is grossly operating below full capacity, and enlightened public awareness on the operations of the capital market will play a much bigger role in alleviating the shortfalls that exist.

Transmitted: 1999