Speech by Mrs. Stella Kilonzo, Chief Executive, Capital Markets Authority, During the Listing of the Ksh2.5 Billion Shelter Afrique Medium Term Note at the Nairobi Stock Exchange, 20th September 2011
The Minister for Housing, Hon Soita Shitanda;
The Shelter Afrique Managing Director, Mr Alassanne Ba;
Permanent Secretary Ministry of Finance represented by Mr John Murugu;
Chief Executive, Nairobi Stock Exchange, Mr Peter Mwangi;
CfC Stanbic Bank, the Transaction Advisor, represented by the Director,
Business Development East Africa, Mr. John Ngumi;
All members of the transaction team for the Shelter Afrique Bond Issue;
Distinguished Guests and the members of the Fourth Estate;
All Protocols observed;
I am delighted to be here this morning as we mark the listing of the first tranche of Ksh.2.5 billion Shelter Afrique Medium Term Note under the Ksh.3 billion Medium Term Note programme.
This is an important event for the capital market as it is the first new medium term note programme to be listed at the Nairobi Stock Exchange this year. In addition to the proceeds of this bond issue being applied towards the development of housing in Kenya, its listing will further deepen the range of capital markets products, a key component towards the transformation of Nairobi into an International Financial Centre.
Shelter Afrique has proven in a basic area like housing, it can access funds through the capital markets. It has raised nearly Ksh5 billion over the last ten years to support development of housing projects in Kenya. Indeed Shelter Afrique is one of the pioneer corporate bonds issuers (in 2000) in Kenya, even before the regulations on Fixed Income Securities were developed.
KenGen issued a Ksh25 billion infrastructure bond in 2009 to finance investments in additional power generation capacity.
The uncertainties we have seen in the global environment makes a case for long term funding through the Capital Markets.
In Kenya, the sector has witnessed significant growth over the last 10 years, with major housing projects coming up in the main urban centres throughout the country. However, the growing population has put pressure on the housing sector, which has been recognized under the Economic Pillar of the Vision 2030 Economic Blueprint as one of the infrastructure projects. Indeed under the Bill of Rights in the Constitution housing is classified as a Right for all Kenyans.
Ladies and Gentlemen; The rising demand for housing makes a strong case for innovative ways of raising long term financing to support the sector. The bond market offers an optimal avenue for mobilizing such resources.
Ladies and Gentlemen; The Government has continued to promote and support deepening and vibrancy of the bond market through provision of a number of policy incentives including: lengthening the bonds maturity profile to 30 years and exemption from withholding on interest income for bonds issued for infrastructure financing, regulatory framework to facilitate introduction of an OTC bond market alongside the exchange traded bonds under a Hybrid bond model; automated trading and, enhanced settlement to T+3.
These measures have had a significant impact on the secondary bond market with turnover recorded at Ksh.255 billion in the first half of 2011, compared to close to Ksh.480 billion for the whole of 2010.
The Authority is cognizant of the fact that housing remains an important challenge for the Kenyan Government and has made significant strides towards the creation of Real Estate Investment Trusts (REITs). The regulations to facilitate this are at an advanced stage of being finalized to under the Collective Investment Schemes framework.
As I conclude my remarks, I would like to wish Shelter Afrique success in their efforts to facilitate supply of additional housing units through long term funds raised from the bond market in Kenya.