An employee poses in front of an electronic stock information screen at the Nairobi Securities Exchange Ltd. (NSE) in Nairobi, 2015, Notes.[Riccardo Gangale/Bloomberg]
For investors, Mwai Kibaki’s transformative ideas in the capital markets between 2002 and 2013 will surely outlive him.
President Kibaki was many things to many people, but an admirable economist to almost everyone.
He leaves the stage at a time when every current economic problem is leading enemies and friends to pose together: what would Kibaki do?
Kibaki, a career civil servant, took office in 2002 as the economy nearly stalled after posting 0.5 percent growth that year.
The economy had created 26,552 additional formal sector jobs and foreign direct investment in Kenya was US$27.62 million (Shh3.2 billion).
But it was his five-year economic recovery for prosperity and job creation, launched in 2003, that was to etch him into the hearts of many Kenyans and investors.
The strategy aimed to create at least half a million jobs annually, reduce the poverty rate by at least 5 percent, bring inflation below 5 percent and grow the economy by at least 7 percent.
His wand? Find a way into the hearts of investors so they invest more and grow businesses, ending up employing more people and sharing the returns with locals.
He had to see companies expand and new ones form to add to the national pie. That required investors to open their wallets.
And it didn’t take long for green shoots to appear.
At the end of his first term in office, inflows of foreign direct investment amounted to 1.1 billion US dollars (127 billion schillings).
His ideas impressed well-funded investors as much as he did ordinary Kenyans.
To date, the best years for many companies are 2012 – Kibaki’s last full year in office before handing power to Uhuru Kenyatta the following year.
His accelerated infrastructure spending soon opened up once-sleepy neighborhoods and helped locals appreciate the process of wealth creation.
For example, the Micro, Small and Medium Enterprises Act 2013 was introduced to support the growth of small businesses and contribute to economic growth.
Former President Mwai Kibaki. He was finance minister for 13 years. [File, Standard]
Under his oversight, the financial services sector was revolutionized to enable M-Pesa, a technology that amazed Kenyans and the world alike.
Another feather in Kibakis’ cap was reflected in the capital markets, which after years of slow activity suddenly became a place for investors to invest and earn returns.
The Nairobi Securities Exchange (NSE) had weathered years of stagnation until the winds of change blew from Kibaki’s administration to the trading desks.
The NSE 20 Share Index, which reflects the performance of the 20 best counters, rose from 1,384 points in January 2003 to 6,161 points in early January 2007.
This meant that investors reaped returns from the capital markets, a trend that would encourage more retail investors to join.
In November 2004, the clearance and settlement of shares was automated, marking one of the defining moments in the Nairobi Stock Exchange.
Increased interest in the NSE prompted the Kibaki government in 2008 to introduce regulations that increased trading hours from just three to six.
Under his oversight, the NSE also experienced a boom in initial public offerings (IPOs), notably with the listing of Kenya Electricity Generating Company and Safaricom in 2006 and 2008 respectively.
Other entries during the Kibaki era included Scan Group, Eveready, Access Kenya, Kenya Re, Cooperative Bank, Britam, Mumias Sugar, TransCentury and East African Cables.
Safaricom and Co-op Bank have emerged as some of the top five companies by market value, indicating the quality of IPOs during Mr Kibaki’s tenure.
The launch of the Growth Enterprise Market Segment (Gems) in 2013, a segment for small and medium-sized companies that can be listed on the NSE under flexible requirements, was further evidence of Kibaki’s belief in an economy for all.
Over the past nine years, the NSE has experienced an IPO drought for all high-profile companies, even as some existing companies such as Eveready, Mumias, Kenya Airways, Uchumi and TransCentury struggle to keep their lights on.
NSE’s annual listing fee revenue has declined, hitting a six-year low in 2020 at ATS 76.06 million.
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