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Kenya: NSE Boss in a Fix As Board Delays Renewal of His Contract
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Business Daily (Nairobi)
13 May 2008
Posted to the web 13 May 2008
Washington Gikunju
Anxiety is building in the capital markets following reluctance by the Nairobi Stock Exchange (NSE) board to renew chief executive Chris Mwebesa's contract, at a time when speculation is rife about the unexplained delay in the appointment of the Capital Markets Authority (CMA) chief executive.
For almost five months now, this crucial economic sector that facilitates trade in listed securities valued at over Sh1 trillion held by Government and investors has faced a leadership vacuum following the expiry of contracts for the two top capital market institutions' chief executives. With investors losing money through rogue stockbrokers and renewed interest in the stock, succession at the NSE is now a major issue of public interest.
The CMA chief executive's post fell vacant in December last year following former CEO Edward Ntalami's sudden exit, while Mr Mwebesa's contract was due for renewal on February 25.
The market watchdog's top position has remained vacant for five months now. An attempt to recruit a new CMA CEO by the recruitment firm, Hawkins Associates flopped in March.
The current acting chief executive, Stella Kilonzo, is a CMA board appointee- a situation that critics argue makes her prone to manipulation by members to whom she is answerable.
At the NSE, the other critical institution that watches over an estimated 1.5 million investors' accounts, Mr Mwebesa is still second-guessing whether his contract will be renewed, with reports emerging of sharp boardroom divisions over the issue.
Top board members believed to be holding the key to Mr Mwebesa's contract renewal insist that there is nothing unusual in the apparent delay, but others read mischief and have been pushing for quick negotiations.
Mr Eddy Njoroge, the chairman of an ad hoc NSE board committee formed to negotiate new employment terms with Mr Mwebesa, insists there is no crisis at NSE since the CEO is still office, but declined to comment on how far the discussions had gone.
Mr Njoroge, who also chairs the NSE finance committee, was mandated by the board to negotiate new terms with Mr Mwebesa in February.
The NSE boss is normally hired on a three-year contract subject to renewal three months before expiry, which in Mr Mwebesa's case should have come in November last year.
"Mr Mwebesa is still in office, I will not discuss his personal terms with you," Mr Njoroge told the Business Daily.
The NSE board meeting minutes dated March 20 seen by Business Daily indicate that the board requested Mr Njoroge to conclude on the contract negotiations in March, but he has reportedly not contacted Mr Mwebesa since then.
Though Mr Mwebesa has remained in office, some board members have reportedly been keen to downplay the renewal every time the issue is raised at NSE's monthly board meetings. Contacted for comment, Mr Mwebesa said contract issues are handled by the board and declined to comment further.
Sources close to the CEO however say that he plans to put up a case for better terms based on his achievements at the stock exchange during the last three years.
He has presided over the installation of an Automated Trading System (ATS) and the migration to a Wide Area Network (WAN) during his tenure, developments that have increased speed and trade volumes at the bourse.
He also supervised the listing of KenGen, Scan Group, AccessKenya, Kenya Re and Equity Bank at the stock market, besides other rights issues and bond listings.
But it is also during his term that Francis Thuo and Partners stockbrokers went under, while Nyaga Stockbrokers was placed under statutory management.
Appointment to the NSE chief executive's position remains a highly subjective affair that is decided on the stockbrokers' whims rather than any laid down structures.
It is believed that Mr Mwebesa's fate will largely be determined on the basis of the looming succession battle for NSE chairmanship position that falls vacant with the expected departure of chairman Jimnah Mbaru next month.
Board members are said to be divided into two camps each keen on installing a 'friendly' CEO, especially coming at a time when the process to separate ownership of the NSE from the brokers (demutualisation) is in top gear.
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At stake is the methodology for sharing out NSE assets estimated to be valued at Sh1.7 billion according to a valuation done by financial consulting firm Ernst and Young last year, with the CEO expected to play a central role in the demutualisation process.
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