Implementation of the Capital Market Master Plan to be fast-tracked
National Steering Committee receives key recommendations for consideration
Nairobi October 30, 2015…As part of its drive to accelerate the implementation of the Capital Market Master Plan (CMMP), the National Steering Committee (CMMP-SC) received the first set of key recommendations designed to ensure that the objective of transforming Nairobi into a financial hub is realised through the execution of the CMMP. The inaugural CMMP-SC meeting, chaired by the Cabinet Secretary National Treasury, was held yesterday.
The membership of the CMMP-SC comprises; the Attorney General; Cabinet Secretary Agriculture, Livestock, and Fisheries; Cabinet Secretary Mining; Governor Central Bank of Kenya; Secretary, National Economic and Social Council; Director General, Communications Authority of Kenya; Chairperson Financial Sector Regulators Forum and the Chief Executive of the Capital Markets Authority.
The raft of recommendations were presented by the Chairman of the CMMP Implementation Committee, who is also the Capital Markets Authority Acting Chief Executive, Mr Paul Muthaura, together with the public and private sector members of the Implementation Committee. The Steering Committee also received an update on notable CMMP milestones achieved so far including; development of a new Corporate Governance Code for Public Listed Companies and a Stewardship Code for institutional investors; removal of the 75 percent limit for foreign ownership of listed companies; approval of the first REIT seeking to raise Ksh12.5 billion; licensing the Nairobi Securities Exchange (NSE) to set up a derivatives exchange; demutualization and self-listing of NSE; the introduction of fiscal incentives to support the roll out of REITS and ABS; reduction of the NSE trading participant admission fees from Ksh250 million to Ksh25 million to lower barriers to market access; and initiatives to enhance market liquidity through Securities Lending and Borrowing, Margin Trading, and Short-Selling.
Mr Muthaura highlighted that some of the key recommendations tabled for consideration include: amendment of the requirements for local shareholding of foreign-owned companies operating in Kenya under the Companies Act; establishment of a National Sharia Advisory Board to support the uptake of the “participatory financing” market products and services by setting out standards for all Sharia products designed in Kenya; expediting the gazettement of the draft consolidated Capital Markets (Derivatives Market), Regulations (2015) and determination of the policy roadmap for the consolidation of the country’s central securities depositories. The CMMP-SC was also engaged on supporting the early clarification of the model to be adopted in the consolidation of the financial sector regulators to facilitate the implementation of the Vision 2030 ambition of making Nairobi an International Financial Centre and full implementation of the CMMP.
Other recommendations tabled for consideration related to: tax neutrality measures such as exemption of REITs and ABS from Value Added Tax to ensure the tax cost of structured finance is not significantly higher than conventional funding and; facilitating the effective setting up of a spot commodity exchange in Kenya through the extension of CMA’s mandate to regulate spot commodities exchanges across the relevant sectors of the economy such as such Mining, Agriculture and Energy in order to centralize oversight and secure coordination of standards.
Notes to Editors:
Capital Market Master Plan
The Government of Kenya is currently implementing a long-term strategy to transform Kenya into a middle-income, rapidly industrializing country by 2030, offering all its citizens a high quality of life. To achieve this aspiration, we need sustained economic growth at an annual rate of 10 percent over the next two decades. Critical to achieving this high-level growth is availability of capital to fund the range of projects that form part of Vision 2030. The financial sector must therefore drive a significant increase in investment in Kenya by mobilizing both domestic and international resources. Under the second medium term plan two key flagship projects for the financial services sector have been included namely; the establishment of the Nairobi International Financial Centre and the development and implementation of a Capital Market Master Plan. These projects are mutually reinforcing and each needs to be addressed to ensure a vibrant sector that effectively finances the country’s investment needs for sustainable development.
The launch of the Capital Market Master Plan represents a significant milestone in the history of Kenyan capital markets. It marks the first comprehensive strategic plan, formulated in collaboration with all stakeholders to chart the development of the capital market for the next ten years. The Master Plan was driven by broad consultation with internal and external stakeholders, including international benchmarking with jurisdictions that have instituted financial sector reform strategies, attained International Financial Centre (IFC) and/or Gateway status or developed diversified and sophisticated capital market products and services. The Master Plan forms a crucial guide in our journey to realize our vision to become “The Heart of African Capital Markets”. With growing pressure on the traditional sources of government revenue as we implement programmes under the devolved government system, this Master Plan comes at a time when there is need for clear strategies to position the capital market to take up a central role in the next stage of development.
In the development of the Master Plan, consideration was given to the uniqueness of Kenya’s particular circumstance, environment and aspirations as detailed in Vision 2030 and as deemed necessary by the diversity of stakeholders in the capital markets. Critically, in tailoring solutions and in defining strategic imperatives, careful consideration was given to ensuring alignment with parallel, cross-cutting initiatives, including constitutional and regulatory reforms, as well as the development of Nairobi as an International Financial Centre. In establishing medium-term goals for Kenya’s capital markets, the Capital Markets Master Plan Steering Committee took careful cognisance of the important role that the capital markets must play in the strengthening of an integrated financial system and in the development of the nation, while being conscious of wide-ranging regional implications and benefits.
The Master Plan is anchored upon three key pillars namely: Support for Development and Economic transformation; Infrastructure of the Markets; and Legal and Regulatory Environment. The above three pillars form the foundation of the transformation, from which nine core building blocks are derived as strategic imperatives of the Plan, with specific initiatives and action steps identified to ensure achievement of the envisaged outcomes. The five-fold rationale for developing a Capital Market Master Plan are to:
Build on recent market reforms to address regulatory and institutional constraints to strengthen market infrastructure, intermediation, oversight and governance standards;
Stimulate innovation to broaden product and service offerings, deepen market participation and liquidity, and drive transformative economic development;
Streamline and augment funding for developmental projects under Vision 2030 as well as to provide alternative financing sources for devolution of services;
Establish the Kenyan capital markets as a centre of excellence and gateway for regional and international capital flows; and
Reinforce the development of Nairobi as an International Financial Centre.
Capital Markets Authority