Kenyan bourse woos property bonds

NAIROBI – Kenya’s Nairobi Stock Exchange (NSE) stepped up efforts yesterday to convince the government and local authorities to issue infrastructure bonds to finance delayed projects and accelerate economic growth.

The local stock market has soared thanks to a booming economy, improved company earnings and high liquidity that has prompted unprecedented interest from small investors competing for new initial public offerings (IPOs). This year, the stock market also completed the highly successful listings of state-run utility Kenya Electricity Generating Company (KenGen) , Equity Bank and advertising firm Scan Group .But experts fault President Mwai Kibaki’s government, which came to power in late 2002, for failing to tap the high liquidity in the market to finance key infrastructure projects.Despite recording strong economic growth of 5,8 per cent last year compared with 0,6 per cent in 2002, experts say corruption, poor roads, an unreliable telecommunications network and expensive electricity remain major bottlenecks to investment.”We think the government can issue these bonds, and if they are properly conceptualised, properly structured with detailed information on specific infrastructure projects, the capital markets will absorb them without a second thought,” said NSE’s chief executive officer Chris Mwebesa.Currently, the government issues treasury bonds that are traded on the stock market, but the money raised is primarily for meeting recurrent expenditure and debt repayment.Mwebesa urged government agencies such as the airports authority, national housing corporation, various local authorities and the roads board to issue infrastructure and municipal bonds through the stock market.The bonds are expected to attract investment from pension funds, cooperative societies and the private sector.In this year’s budget for the 2006/07 (July-June) fiscal year, the government exempted from tax the interest on all listed infrastructure bonds maturing after at least three years.Nampa-ReutersThis year, the stock market also completed the highly successful listings of state-run utility Kenya Electricity Generating Company (KenGen) , Equity Bank and advertising firm Scan Group .But experts fault President Mwai Kibaki’s government, which came to power in late 2002, for failing to tap the high liquidity in the market to finance key infrastructure projects.Despite recording strong economic growth of 5,8 per cent last year compared with 0,6 per cent in 2002, experts say corruption, poor roads, an unreliable telecommunications network and expensive electricity remain major bottlenecks to investment.”We think the government can issue these bonds, and if they are properly conceptualised, properly structured with detailed information on specific infrastructure projects, the capital markets will absorb them without a second thought,” said NSE’s chief executive officer Chris Mwebesa.Currently, the government issues treasury bonds that are traded on the stock market, but the money raised is primarily for meeting recurrent expenditure and debt repayment.Mwebesa urged government agencies such as the airports authority, national housing corporation, various local authorities and the roads board to issue infrastructure and municipal bonds through the stock market.The bonds are expected to attract investment from pension funds, cooperative societies and the private sector.In this year’s budget for the 2006/07 (July-June) fiscal year, the government exempted from tax the interest on all listed infrastructure bonds maturing after at least three years.Nampa-Reuters