ss 2011 I Issue 2 I 1 2 I 2011 I Issue 2 Publisher EXCHANGE TEAM Chief Editor Carol Karugu [email protected] Sub Editor Susan Kabui [email protected] French Translation Emma Wenani [email protected] The Exchange Committee Members Joseph Kitamirike (Chairman, CEO - USE) Peter Mwangi (Member, CEO - NSE) Donald Ouma (Member - NSE) Harriet Kiwanuka (Member - USE) Emanuel Nyalali (Member - DSE) Celestin Rwabukumba (Member - ROTC) Contributors Evelyne Ogutu Caleb Atemi Handerson Mwandembo Kinoti Gatobu Felix Okatch Cathy Mputhia Isaac Rutenburg Sammie Kamuti Design Kichimbi Brand Solution [email protected] Photography Shutterstock, Image Library Advertising Sales [email protected] [email protected] TEL: 254 (020) 2831000 Distributed by Nation Media Publishing in Uganda, Tanzania, Kenya and Rwanda. The Exchange Magazine is owned by Nairobi Stock Exchange, Uganda Securities Exchange, Rwanda OTC Market and Dar es Salaam Stock Exchange. All rights reserved. Reproduction in whole or in part without written permission of the editor is strictly prohibited. The greatest care has been taken in compiling this magazine publication. However, no responsibility can be accepted by the publishers or compilers for accuracy of the information presented. 2011 I Issue 2 I 3 CONTENTS 10 Region Analysis 32 Inspired Horizon 44 Since I Got Listed How the Markets and their When Ian Kabiru quit his well KQ flies Kenyan flag high in rapid Economics are doing. paying job at a multinational route and fleet expansion to venture into business, he plan 22 EASEA thought all will be a rosy affair The establishment of the 46 Since I Got Listed Tanzania Mortgage Refinance 34 Capital Markets From very humble beginnings dating Company Limited (TMRC) James Muratha, the current regional back to 1896 when its predecessor, director of Stanbic Investments, has the National Bank of India opened its spent much of his career working very first outlet in Zanzibar, KCB has in Canada’s financial sector and grown to become Eastern Africa’s 24 Intellectual Property knows of how part of Canada’s premier banking institution that Does your Business have a social beautiful city of Toronto came up: provides financial services to both media presence? It should. the retail and corporate sectors 36 Book Review 26 Capital Markets as a Economic Gangsters Corruption, Violence & the 48 Since I Got Listed Dependable Spring Board Poverty of Nations The Fall & Rise of Uchumi “NSE SMEx Draft Regulation, “We found out the fate of A Welcome Alternative the company on TV. for SME Financing” It was shocking and terrifying 40 C.I.C Micro Insurance and we did not know whether The Sultan of the Co-operative we still had jobs or not. It was 28 Bagamoyo Movement Insurance Company: a period of wait and see”, The story of Bagamoyo is written Nelson C. Kuria, on recalls head of ICT Charles Thuku. in tears and blood. It is a narrative Micro Insurance and SMEs that can move even the most callous of hearts to sobs and tears All rights reserved. Reproduction in whole or in part without written permission of the editor is strictly prohibited. The greatest care has been taken in compiling this magazine publication. However, no responsibility can be accepted by the publishers or compilers for accuracy of the information presented. Advertising: For advertising and our editorial calendar, email [email protected] or [email protected] to receive a rate card and more information. 4 I 2011 I Issue 2 Medisure press ad copy copy.pdf 1 4/26/11 2:16 PM C M Y CM MY CY CMY K 2011 I Issue 2 I 5 Chairmans Note in that market in order to provide a product or service, the issuer lists on that Exchange in order to raise its profile; 2. The market has an institutional investor base that will enable the issuer to raise the capital it requires in the currency of it’s choice; 3. The market is sufficiently deep to provide liquidity for the issuer’s securities so as to enable investors take up or exit from their investment. For the issuer, the provision of liquidity reduces the liquidity premium demanded by the investor, which translates to a lower cost of capital for the issuer; 4. The market can also facilitate liquidity, by assuring a critical mass of sectoral analysts who provide optimal coverage of the issuer in the secondary market. Companies who understand how they can use the capital markets to progress their strategic initiatives and are willing to adhere to the disclosure requirements of markets Chairmans Note will be rewarded by the market and prosper. Besides, a flexible regulatory environment t the Forum for Developing shares among exchanges. While this practice (which still addresses investors’ needs Markets, held in Beijing from June has increased investment opportunities for for accurate, timely, easy to understand, 1 – 3 2005 by the World Federation domestic investors and provided increased information), and affordable costs of listing, of Exchanges, Hsieh Fu Hua, Chief stability for the exchanges, it is a process exchanges that meet the above criteria, are AExecutive Officer of the Singapore Exchange that gives a false sense of progress. Securities able to attract issuers and hold up against introduced the theme by noting that despite exchanges should be an integral element competition from the corporate banking the demutualization process, exchanges were in a country’s capital market. East Africa’s sector – in which banks come together as a still serving a public good, especially when it economy is dominated by firms whose size syndicate and pool their resources to provide comes to Small and Medium sized Enterprises is medium to small. The capital market is a loan facility to a corporate borrower. (SMEs). Prior to listing, venture capitalists and intended not only to provide investment government start up schemes are essential to opportunities, but more importantly, for In today’s increasingly globalizing world, SMEs. When listing, higher standards should domestic economic growth, securities exchanges are also fending off competition apply to SMEs, and the listing sponsor should exchanges should provide incentive and from other exchanges. Further trade have an essential role. A strong retail market is assistance to the capital growth of domestic amongst the members of East Africa, more important to back up listed SMEs. enterprises. That this is not occurring is a globalization and certainly more deregulation cause for concern, yet it is a matter that can and competition is creating issuers that wish Investor confidence should be built mainly be addressed through public and private to expand beyond their home and regional on corporate governance and surveillance. sector measures. markets. They will migrate to the exchanges Particularly for SMEs, the investor, must be It is the twin objective of addressing the that offer them the deepest pools of capital confident that their investment is protected above two (2) scenarios that makes the in the currency of their choice at the most and that they have continual access to case for an SME market in East Africa ever affordable cost. In summary, in order to be information to enable them make decisions. more plausible. In numerous fora, one hears relevant, Exchanges must position themselves The investor also needs to be assured that repeatedly that the future economic growth to serve those issuers that dominate their the trading platform is robust and quick – of developing African countries is dependent economies and particularly those in the facilitating order execution; then they will upon the success of the small and medium- fastest growing sectors of the economy. bring their capital - deepening the pools sized enterprise sector. From rural areas to of capital available to credible issuers. It is the cities, the growth of small businesses therefore important to encourage research on will generate increased employment, wages, SMEs. In 2005, a third of the SME companies goods and services, and tax revenues. Not listed on the Singapore Exchange were only is the growth of SMEs a vital element to a covered by a research scheme. A common nation’s economy, but also that today’s SMEs Mr. Joseph S. Kitamirike lament heard throughout the securities will become tomorrow’s main market listings. Chief Executive Officer exchanges of Africa’s developing countries is The theme of this issue of the Exchange Uganda Securities Exchange that there are too few investment products magazine is “The capital markets, a and too little investor demand. dependable springboard for the growth of The principal growth in listings has come SMEs.” An issuer lists for a variety of reasons:- from privatizations and cross-listings of 1. As a precursor to establishing itself one life one bank DL size.indd 1 6/9/11 11:48 AM 2011 I Issue 2 I 7 Members East Africa Nairobi Stock Exchange Dyer & Blair Investment Bank Ltd CFC Stanbic Financial Services Member Firms Pension Towers, 10th floor, CFC Stanbic House, P.O. Box 45396 - 00100 P.O. Box 47198 – 00100 Drummond investment Bank Limited Nairobi Nairobi Hughes Building, 2nd floor, Tel: 3240000/2227803/4/5 Tel: 3638900 P.O. Box 45465, 00100 Fax: 2218633 Fax: 3752950 Nairobi. E-mail: [email protected] E-mail: [email protected] Tel: 318690/318689 Web: www.dyerandblair.com Web: www.csfs.co.ke Fax: 2223061 E-mail: [email protected] Reliable Securities Ltd. ABC Capital Ltd Web: www.drummond.co.ke IPS Building, 6th Floor IPS Building, 5th Floor P.O BOX 50338 - 00200 P.O. Box 34137- 00100 Kingdom Securities Ltd Nairobi Nairobi Co-operative Bank House,5th Floor, Tel: 2241350/4/79 Tel: 2246036/2245971 P.O. Box 48231 00100 Fax: 2241392 Fax: 2245971 Nairobi E-mail: [email protected] E-mail: [email protected] Tel: 3276000 Fax: 3276156 Afrika Investment Bank Ltd.