14 October 2008
editorial
Nairobi — One inevitable consequence of unbridled capitalism is business failure. That is why the financial woes currently facing stockbroker Discount Securities are not a novelty.
Even then, it becomes an atrocity when such failures could have been prevented by simple regulatory measures and competent oversight.
As investors engage in another bout of head- scratching and hand-wringing over the possibility of huge cash losses in these already bleak times, the Capital Markets Authority deserve praise for intervening before the situation escalates into a washout.
Still, at a time when the CMA is being relied upon to provide illumination, its conduct of the "takeover" is unlikely to cool off mounting jitters.
The semantic obfuscation that marked a function at which its top officials refused to take questions from journalists is not exactly the way to build confidence.
One hopes that the newly-appointed managers, audit firm KPMG, will move fast to evaluate the level of the firm's indebtedness and craft strategies that will ensure its survival while ring-fencing investor cash.
Naturally, calls for better-capitalised brokers and investment banks will gain traction. Former Finance minister Amos Kimunya proposed a floor of Sh50 million for brokers and Sh250 million for banks, against previous levels of Sh5 and Sh30 million respectively.
The crisis at the Nairobi Stock Exchange is one of corporate governance.
As long as a small, incestuous coterie of owner-managers rule the roost, there will be many Discounts, Nyagas and Francis Thuos. Ownership and management of these firms must be divorced. Now.
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