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Despite Reforms, Investor Confidence Remains Low

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I was well behind on my reading this week and was therefore late in being alerted to the changes at the Nairobi Stock Exchange (NSE). In fact, it was only a brief sentence in one article that set me off investigating what else the Titans of the Kenyan economy have been up to recently.

So the NSE have a not-entirely new board, with one seat unfilled. They promise to restore investor confidence, though not by “promising anything novel,” according to new second vice-chairman, Job Kihumba. Very well. I can’t really argue with that. At least it means the NSE board might actually have been considering alternatives.

The CMA meanwhile, home to the thoroughly level-headed Stella Kilonzo, has finally taken action to prevent firms from trading while financially embarassed, albeit only temporarily. Nevertheless, rather than maintain the licensing regime, whereby firms are expected to adhere to particular standards, Stella and her minions are considering an alternative “risk-based supervision system,” which sounds like a bureaucratic nightmare, and not a vastly more efficient exercise either. Still, I’m sure she knows what she’s doing.

All this activity comes hot on the heels of Jos Konzolo’s hasty resignation as chairman of the Kenya Association of Stockbrokers and Investment Banks (KASIB). A small matter of attempting to defraud Barclays of Ksh100 million and change. I’m sure it will all be sorted out soon. He only quit so that “the integrity of the market is left intact.” Maybe he’ll be back once he’s had his day in court?

And it is this sort of thing that makes me sympathise with those worried about their investments. The NSE promised change, but has only managed to get new people on board. The CMA seems to regard less scrutiny as a solution to the bad behaviour that had been going on previously. The CMA and the NSE appear to still have territorial issues over who governs what, neither appears to have an appetite for substantiative reform, and the people they are supposed to be supervising can now count a suspected fraudster as one of their number. If you had a pile of money to invest, would you entrust this happy band with your savings?

It’s therefore not surprising that the stock exchange has not bounced back from its current lows. People are still worried about further stockbrokerage collapses, they want to know what protections are in place against unscrupulous firms, they want to make sure that their investments are safe. Currently, neither the CMA or the NSE are doing enough to engender confidence in the market.

[Image by Carf]


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