Firms should play active role in securities exchange revival

Most countries are grappling with an economic downturn and looking at various barometers to identify where they stand. Whilst gross domestic product (GDP) is an important indicator, there are other measures. A stock exchange is seen as a dependable barometer to measure a nation’s economic condition.

Global economies have faced many blows in the past few years due to a multitude of reasons, including the Covid-19 pandemic and geo-political issues. Listed entities mostly include dynamic companies which are leaders in their sectors.

Nairobi Securities Exchange (NSE) has 62 listed companies across 11 sectors. Over the past three years, it has witnessed a dip in the index and share prices owing to internationals offloading shares en masse.

Owing to a general lack of transactions, most brokerage firms can barely break even. Government policies and the Finance Bill are adding pressure via higher taxes, which detracts foreign investors from bringing in finances. It is crucial to address this as the country suffers from foreign exchange deficits and international currency prices continually strengthening against the Kenya shilling.

Dividend payout policies

Despite that, some blue chip companies maintained dividend payout policies, are high- yield and remain underpriced. One would assume that reputable listed companies issuing decent dividends and with scope for growth in share price would attract investors. This has not been the case and a strategy for the revival of NSE is important. Financial injection into the exchange and economy is crucial.

Whilst these are factors for policymakers to consider, one may ask: “What role are the companies themselves playing in ensuring that there is a revival of their share price?” The answer? A strong performance, good financial governance, growth with good returns to stakeholders and an enhanced strategy to form stronger relations with investors.

The Companies Act, 2008 requires companies to present annual financial statements to shareholders at a shareholders’ meeting—or, for public companies, AGM. Many wait till a fortnight to the AGM to issue annual reports and financial statements and reports online, let alone hard copies.

BSE-listed companies

It is time we borrowed best practices from around the world. In India, for instance, BSE-listed companies release financial statements almost real-time after the announcements. Corporate action lists are circulated and updated in a timely manner.

Why is it that shareholders in Kenya have to repeatedly follow up with company registrars, brokerage firms and respective company secretaries on multiple occasions to receive information of corporate action and financial statements?

The economy requires foreign direct investment. So, it is crucial for companies to engage stakeholders, especially shareholders, and provide information in a timely manner to the public directly and via the company registrars. The information should not be shrouded in secrecy till the last moment. Every positive action will help in the revival of NSE.

Mr Ritesh is a business and financial analyst, humanitarian and conservationist. [email protected].