Over the decades, Kenyans have been leaving the country for “greener pastures” in the European and North American countries. These Kenyans in the Diaspora have contributed immensely to the economy by repatriating capital back to the country. Recent statistics indicate that over Ksh.70 billion is being sent into the country annually by this Kenyans, constituting almost a third of the country’s GDP.
Most of the money sent to the country by Kenyans in the Diaspora in the past was basically for domestic use which ended up being consumed rather than invested. Very little of it was invested in infrastructure and the securities market. Analyses show that only 6 percent of such remittances were channeled towards investment purposes. But a recent trend indicates that an increasing number of Kenya’s sons and daughters in the Diaspora are bringing their hard-earned money into the country for investment in the stock market and other business ventures. This is due to favorable factors that have caused the Nairobi Stock Exchange (NSE) to experience a continuous bull run for the last three years. Furthermore, the improvement in the bourse liquidity has made trading in shares easy.
According to Mr. Sunny Bindra, a management consultant in Nairobi, the amount of money sent from the Diaspora is far much more than the foreign direct investment (FDI) and official foreign aid combined. This simply means that Kenya is getting more interest-free funds from its own people abroad. In fact most of the FDI received is targeted towards the extractive industry which has not added much needed value to the economy, except to accelerate capital flight and create renter-class mentality.
The Diaspora’s growing interest in the current market activities in the country is however faced with huge set backs. The NSE has had a spate of new listings in the market- thanks to the ongoing privatization and banking reforms. But the problem still remains: how effectively can we target or mobilize resources from the Diaspora toward the stock market?
First, we can start by getting interested fund managers and individual investors in the Diaspora apprised of new developments, progress and stock market trends in the country. We can do this by inviting such entities to major NSE events taking place at home or abroad and utilize their ideas and inputs in fine-tuning marketing strategy. Such strategies will be used to make the larger Kenyan Diaspora to invest in the NSE.
Secondly, we can aggressively pursue ongoing effort toward modernization of the bourse, by improving market liquidity, strengthening corporate governance, streamlining regulations, and entrenching market transparency, enabling free and efficient flow of market information throughout the country and in the global arena. These will attract even more investors from the Diaspora and the larger foreign world. The achievement of these goals is far much complex and may take long.
Thirdly, increasing of the number of listed firms in the NSE will bring in foreign fund managers and individual investors from the Diaspora. This can be achieved by encouraging cross-border listings of securities within the region and the continent at large, as a stepping-stone towards overseas quotation of African blue chip companies. Also creating a secondary market for listing of smaller and up coming companies will increase on the market capitalization.
We can also assist qualified domestic companies such as Kenya Airways and East African Breweries Ltd. to tap into the international capital market through issuing Depositary Receipts and debt instruments in major markets of the world such as the London Stock Exchange (LSE) and the New York Stock Exchange (NYSE), thereby mitigating exchange risks and enabling investors in the Diaspora to plough money into viable African companies.
Lastly but not least, targeting professional associations in the medical, accounting and IT sectors, as well as reaching out to community groups abroad and conducting seminars and focused investment presentations during annual conventions and meetings of these associations. During these seminars, local brokerage firms can be encouraged to reach out to foreign counterparts and establish mutually beneficial relationships to serve prospective investors and clients.
By Kevin Mwanza
Mr. Mwanza is an African Executive Staff Writer
Comment on this article!