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    A proactive regulator of competitive and robust capital markets

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    Developing Kenya's capital markets to be an investment destination of choice through facilitative regulation and innovation.

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    Promoting investor education, awareness and interest in the capital markets

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    Strengthening institutional capacity to effectively and efficiently deliver on its mandate




Invited Speakers

Invited participants

Distinguished Guests

Ladies and Gentlemen

Good afternoon

Allow me to take this opportunity, to sincerely thank the Institute for inviting me to speak at this second corporate governance conference. As this forum seeks to highlight the importance of good corporate governance in the socio-economic transformation of East Africa, Ladies and Gentlemen, your presence here today underscores our common commitment to inculcate a culture of good governance in East Africa and the appreciation of the critical role that the capital markets industry plays in supporting this noble course.  

As you may be aware, the East African Capital Markets Regulators have both regulatory and market development mandates. This is informed by the fact that the capital markets are not as developed or sophisticated as those of emerging and developed markets and each jurisdiction is therefore putting in place measures towards achieving critical mass in terms of the range and depth of products, market intermediaries and market infrastructures. Increasing access to the financial and non-financial benefits in the capital markets is therefore high on each regulators’ reform agenda with support of their respective market stakeholders.

There are products specifically tailored to retail investors, institutional investors and high net worth individuals from the demand side and investment is normally focused on capital gains, capital preservation and long-term savings. Retail investors can access the capital markets products such as equity directly, through investment clubs (such as Chamas) or through collective investment schemes. No products have been specifically tailored for women or youth but all categories of investors have easy access to all the products except where expressly specified in law that only institutional investors may participate. It is however expected that through the expansion of products that can aggregate investments this can only serve to facilitate greater access through lowering the barriers or thresholds applicable to capital markets investment and genuine wealth creation.

Entities may also access or raise capital either conventionally or non-conventionally for business expansion and other uses through a number of products. Conventional access options include but are not limited to Initial Public Offers (IPOs), other public issues, restricted offers, private offers, debt issues such as commercial paper and corporate bonds, also referred as plain vanilla issues.

Non-conventional finance options on the other hand include Asset Securitization, Credit Linked Notes, Islamic finance, various forms of Public Private Partnerships (PPPs), several types of Fintech’s such as equity crowdfunding and other forms of structured and/or alternative finance. The common feature with all these products across the East African region is that there are clearly spelt out standards around the governance of these products and specific emphasis on the corporate governance standards being applied in their issuance (such as application of issue proceeds), trading, settlement and ownership.

Ladies and gentlemen, turning back to the broad subject of this session, there has been global momentum in strengthening corporate governance in East Africa and here in Kenya. In the East African region, in implementing the East African Capital Markets Protocol freedom of cross border capital flows, a Council Directive on Corporate Governance that defines broad harmonized principles of corporate governance in the capital markets space within the region has been drafted. Each of the EAC Partner States is now required to transpose the Corporate Governance Council Directive in order to allow for easier cross boarder operation by issuers as well as building comfort for investors in the consistency of governance enforcement when they invest across the region. Whereas other Partner States are at various stages of transposing the Corporate Governance Code into their domestic capital markets laws, Kenya has achieved a key milestone of having in force a Code of Corporate Governance Practices for Issuers of Securities to the Public 2015 (the Code). This legislative instrument is principles based and has specific recommendations on the structures and processes which issuers should adopt in making good corporate governance an integral part of their business dealings and culture.

Ladies and gentlemen, CMA currently supervises 62 listed companies and 5 standalone issuers of corporate bonds, making a collective of 67 issuers.

Upon the Gazettement of the Code, the Authority has spared no effort to ensure its successful implementation. It is in this regard that the Authority widely consulted stakeholders in developing offsite tools including corporate governance reporting template and corporate governance scorecard together with the scorecard methodology for reporting, measuring and monitoring the application of the Code.

The Authority has just completed the first round of assessments of the extent of application of the Code by individual issuers. This assessment is based on publicly available information from the issuers. Subsequently, the Authority has shared feedback to every issuer detailing specific strengths and areas for improvement. The onus being that the Authority works hand in hand with issuers to ensure good corporate citizenry within the Kenyan market.

I will highlight some key findings from the just concluded round of assessments -

  1. 1.The general rating was fair for issuers as a whole. We take this to be a good starting point owing to the fact that it is the first time that issuers are being assessed on their application of corporate governance practices as espoused in the Code. We observed commendable ratings for some issuers who demonstrated leadership through good performance in all the principles.
  1. 2.The principle of ‘commitment to good governance’ recorded the best performance. The metrics in this principle include development and implementation of a board charter and development and monitoring of the company strategy. On the other hand, a need for improvement on the principle of ‘transparency and disclosure’ was noted.

The Authority is in the process of engaging issuers on its draft report on the state of corporate governance in Kenya whose aim will be to encourage issuers of securities to become good and model corporate citizens by adopting and fully implementing the Code and related corporate governance laws, standards and practices.

The Authority is also developing a progression matrix for measuring and monitoring the application of the Code. We are also partnering with the Institute of Certified Secretaries (ICS) of Kenya to align the governance audit toolkits and templates with the regulatory environment in the capital markets sector for future reports.

Other partnerships extend to the Nairobi Securities Exchange with the development green guidelines and a corporate governance index to give issuers an opportunity todifferentiate themselves in the market and tap into a growing pool of global funds committed to good governance and sustainability.

As we look ahead, it would be remiss of me if I did not mention the multi-pronged approach that the Authority has undertaken as underpinned by the development of the Stewardship Code for Institutional Investors, 2017. The objective of the Stewardship Code is to ensure that institutional investors take up their stewardship responsibilities in corporate decision making process.

The Authority appreciates the need for various forms of capacity building forums and will continue to organize and participate in such forums to discuss and enhance governance practices with a view to buttressing the case for good corporate governance in the Country and the region.

Ladies and gentlemen, as I conclude, allow me to note that good progress is being made in corporate governance and we wish to continue working towards this shared objective, a common purpose. With that in mind, I wish to commend the Institute for being at the forefront of the progress being made in the nation. I wish all of you a successful & productive conference. Thank you for according me your undivided attention this afternoon.  

Thank You Very Much!

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