Rotich removes caps on foreign ownership in local firms

Kenya has removed the limitation on foreign ownership of local companies in a milestone step expected to attract new investments.

National Treasury Cabinet Secretary Henry Rotich told investors yesterday that foreign ownership caps would only be retained in cases where the country has a strategic interest.

In essence, the proposal allows foreigners to acquire the entire stakes of companies listed at the Nairobi Securities Exchange.

"I have gazette amendments to the Capital markets (Foreign Investors) Regulations to remove blanket limits on foreign ownership on listed companies except in those cases where we have a strategic interest," Rotich told investors yesterday during the listing of a Sh6 billion corporate bond issued by Centum Investment Company.

The bond was the first of its kind at the Nairobi bourse because it allowed separate listing of the bond and its equity-linked component.

In the new debt instrument, the return for investors is payable to the buyer is pegged to the performance of the stock in the market. If the share price has climbed significantly, the investor will have a much bigger final payout. In the arrangement, investors get to benefit from the gains booked by the company, in this case Centum, over the interest payment on the loans provided.

Rotich's latest move effectively reverses a regulation proposed by one time finance minister Amos Kimunya who had capped foreign ownership of listed companies at 75 per cent.

It was, however, not immediately clear which companies he may have been referring to where the country has a 'strategic interest'. Utility firms like Kenya Power could in Rotich's thinking be of strategic value to the country, hence too delicate to be wholly owned by foreigners.

Johnson Nderi, the manager of corporate finance at ABC Capital, said the review would significantly open up the market.

"Foreign investors would now participate without any limitations and that is very good for the market," Nderi told The Standard.