22 January 2013

Kenya: NSE Targets Mid-Size Firms for Capital

Nairobi — The Nairobi Securities Exchange has launched the Growth Enterprise Market Segment (GEMS) geared at supporting mid-cap companies' strategic aspirations by providing them with access to risk capital through the capital markets.

Kenya Vision 2030 CEO Mugo Kibati explained that through this market, firms will be able to raise substantial initial and ongoing capital, while spurring job growth as they benefit from increased profile and liquidity within a regulatory environment designed specifically to meet their needs.

"When it comes to employment and jobs, which is essentially what Vision 2030 is all about, formalising as many SME's as possible helps them grow because by formalising, they develop robust governance structures which are good for raising funds," he explained.

"The more they have the capacity to raise funding for their initiatives and strategic plans, the more they are able to grow and provide jobs," he added.

Kibati said that GEMS enables small and medium sized firms to raise substantial initial and ongoing capital, while benefiting from increased profile and liquidity within a regulatory environment designed specifically to meet their needs.

"Many of the mid-sized companies are not able to meet the very stringent requirements that one has to meet to be able to list on the main market segment, and that's why this is a very important launch today," he said.

"They need to have a vision - they need to be able to see that we have a target to be one day listed the NSE through this GEMS segment which has much less stringent regulations and rules," headed.

The Chairman of Nairobi Securities Exchange Eddy Njoroge stated: "The establishment of a GEMS market in Kenya will pave way for the listing of Small and Medium Sized Enterprises on the Exchange, which is a major driver of our country's economy."

He further stated that GEMS is supported by a wide community of experienced advisers, ranging from brokers to accountants, lawyers and the fundamental Nominated Advisors who will assist companies to list on GEMS and to comply with good corporate governance and global best practices.

The NSE plans to offer a directors' course on corporate governance to the directors of the mid cap. companies.

Through this Market, the NSE affirms its commitment towards introducing the SMEs to the capital markets and in essence the contribution of this key sector towards the achievement of Kenya's Vision 2030 and the Millennium Development Goals.

Kibati emphasised that the contribution of Small and Medium Enterprises in the economic growth of both developed and developing countries cannot be overstressed.

"In Kenya for instance, SME operations cut across almost all sectors of the economy and sustain the majority of households. According to the Economic Survey 2010, SMEs account for about 80 percent of the country's total employment outside small-scale agriculture and contribute to about 40 percent of GDP," he said.

"The Growth Enterprise Market Segment we are launching today will not only be expected to unlock capital for a large number of these SMEs but also raise the level of savings and investments within the capital markets through additional listings," he added.

He revealed that they expect the GEMS launch to augment various initiatives by both the Government and the private sector to deal with the challenges facing SMEs and to create enabling business environment to encourage growth of an SMEs sector that has strong linkages with major industries.

"The entities listing on GEMS will require no track record on profitability for eligibility and thus the framework offers a critical listing opportunity highly promising start-up firms including those involved in mining and other companies investing heavily in infrastructure based projects that require a heavy capital outlay and do not have a profit history," he explained.

"The resultant vertical and horizontal linkages will have the multiplier effect of general economic development. It also reduces competition for angel and venture capital funds with a general effect of increasing access to capital for SMEs," he added.

Kibati noted that the segment will be built around a new class of market intermediaries called Nominated Advisors, who are duly vetted and approved corporate finance specialists responsible for overseeing compliance of the company with all their listing and continuing obligations.

"This is intended to reduce the costs associated with building up internal capacity for listing compliance prior to a company coming to market, thereby reducing the operation costs and encouraging wider participation of SMEs," he said.

"We at the authority are therefore positive that this bold step will bring on board various issuers and with them investors who previously did not consider the securities market as a destination for their funds," he assured.

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