Sunny days ahead for stock market

By Jane Njeru

In the historic August 4 referendum, majority of Kenyans voted for a new constitutional dispensation that is expected to have far-reaching effects in the country's capital markets. There are numerous provisions in this new Constitution that will bring stability and boost confidence to both local and foreign investors.

The new constitution, which is viewed by the market as a rebirth of the country, is expected to provide a new lease of life to investors and spur trade and revive industries across the country.

The result will be a significant increase in disposable incomes that will find its way to the capital markets.

Expectations are also high that there will be renewed interest from companies seeking to list at the Nairobi Stock Exchange, providing investors with more counters to choose from.

With devolution of power and resources, counties will control their own budgets and will be able to seek independent partnerships abroad.

The international community, recognising this improvement and enormous potential that exists, has shown its confidence in the country’s stock market.

We are already witnessing renewed foreign investor participation in the equities market.

County level

The new Constitution puts in place numerous checks and balances in government expenditure, both at national and county levels. Apart from the auditor-general, there will be a controller of budget whose responsibility will be to oversee the implementation of budgets, both national and county. Appointments at these levels will be by merit, subject to vetting at different levels.

Holders of public office shall be held directly responsible for their decisions on expenditure.

Each county will prepare its own annual budget. It is hoped citizens will make suggestions on funds allocation for projects of their choice.

The document introduces the general principle of public participation in financial matters of both the national and county governments.

High degree of transparency in expenditure and fiscal management at all levels of government will be actively pursued.

Systems of procurement and asset disposal are now public and transparent.

Article 231 (3) of the Constitution gives the Central Bank of Kenya (CBK) absolute autonomy in the exercise of its powers and in the performance of its functions. This independence will help boost investor confidence in the country’s financial markets and this will boost CBK-led like the issuance of infrastructure bonds, government bonds or bills, all of which are traded at the bourse.

The new Constitution also allows for dual citizenship. This has been welcomed by Kenyans living in the Diaspora, especially those unwilling to give up the citizenship of their countries of residence but still want to maintain their Kenyan identity.

This avenue is expected to encourage Kenyans living abroad to actively engage in investing in the country’s economy.

—Njeru is the chief executive of Kenya Association of Stockbrokers and Investment Banks