A new study shows that betting is driving investments away from the country’s capital markets as Kenyans opt for quick cash over long-term returns and building the economy.
The Capital Markets Authority, which is seeking to increase the number of listed companies under its 10-year master plan, conducted the Low Uptake of Capital Markets Products and Listings survey from April-June 2018.
The study found out that investors feel that they could get more money from investing in real estate and speculating over the short term rather than put money in the stock market.
In the past two years, Kenya has seen the entry of tens of sports betting firms, that has seen a sharp increase in the number of gamblers. SportPesa is the market leader with others such as Betin, Mcheza, Shabiki and Betway also angling for a piece of the lucrative business.
“The CMMP (capital market master plan) set down a clear target of achieving 3-4 Gems listing annually but this target has not been achieved despite concerted industry efforts. New products have also been introduced with low uptake witnessed,” said CMA Chief Executive Paul Muthaura.
The Gems section, which was expected to list 19 firms by 2017 and 39 listings by 2023 has only attracted five firms since it was launched in 2013.
In 2016, only one firm, K-Shoe, subscribed to the market joining HomeAfrica, Kurwitu Ventures, Flame Tree Group and Atlas Development in the segment.
Businesses fear listing because they have witnessed other firms lose credibility after their share price pummeled due to price corrections and market valuations after listing.
“The study identified the key factors leading to low product uptake including reputation risk exposure for potential issuers to post-offer/listing price correction following professional valuation,” the CMA boss said.
The new baby, K-Shoe, operating under Nairobi Business Ventures at the bourse, sank into a Sh32.8 million loss just a year after listing and its share price dropped to Sh1.15 from Sh8.
Home Africa is trading at 85 cents a share, from a high of Sh25 in 2013. Flame Tree Group is trading at Sh3.45 while Atlas was suspended from the bourse after failure to resolve listing troubles in London.
Firms feel that although raising money in the market is relatively cheaper than banks, there are other regulatory barriers that limit their capacity to join. The poisonous bonds from Chase Bank and Imperial Bank have also been cited by firms fearing their money would end up down the rabbit hole.
“Restitution of bond investors whose funds remained locked in Chase and Imperial Banks, has dampened the confidence specifically in the corporate bond market,” CMA said.
To address this, NSE boss Geoffrey Odundo proposed a Rapid Mass Visibilities Strategy that seeks to introduce an Incubator Board designed to attract entities.