Recession to hit proposed listing on NSE
The proposed listing of between six and ten state-owned corporations on the Nairobi Securities Exchange (NSE) may not generate optimal results due to a global recession.
According to Genghis Capital, the listings may end up being undervalued due to the gloomy state of the global economy, meaning less capital will be raised.
“We remain concerned over the proper valuation of the respective state enterprises, at a time when the world is heading into a recession,” said Genghis in a research note.
President William Ruto mulls listing between 6 and 10 State corporations within 12 months but with a global recession towards the end of 2022, the firm warns that this may hit these prospects hard.
“Investor apathy looms as most privatised state companies have suffered in efficient IPO pricing that has seen them lose out in the long haul,” said Genghis.
Kenya’s capital markets activities are at least 65 per cent driven by foreign investors meaning foreign players could have a huge impact on the fundraising.
Listing of State enterprises will bring an end to the NSE’s six-year IPO drought, which began in October 2015 with the listing of the Stanlib Fahari REIT.
“As we prepare between six and ten firms for listing on the stock exchange in the next 12 months, and I guarantee you we will deliver on that commitment,” Dr Ruto said. “I also want to urge the private sector to bring five companies as we bring ten.”
The government’s last successful privatisation was the Safaricom IPO in 2008, implying that no State-owned enterprise was sold on the NSE during President Uhuru Kenyatta’s ten-year tenure.
The President has stated that his administration will generate funding for government projects through the Nairobi bourse rather than borrowing from external markets.
Privatisation proceeds would provide the Ruto government with funding to address budget gaps and decrease the load on the exchequer.