Pillar: Financial Markets

Ethiopian Securities Exchange (ESX) Closes Its Capital Raise Significantly Oversubscribed by Domestic and Foreign Investors

Posted on by Kihingu Inc

The Ethiopian Securities Exchange (ESX) announced today the successful closing of its capital-raising exercise, surpassing by more than two-fold the amount of funds it sought to start its operations. Initiated in November 2023, with intensive efforts by its management and advisors and roadshows in Addis Ababa, Nairobi, and London, the Exchange witnessed dramatic interest by domestic and foreign commercial investors, obtaining a whopping ETB 1.51 billion (US$ 26.6 million), representing subscription of 240% of its initial target capital raise of ETB 631 million (US$ 11.07 million), with participation by a total of 48 domestic and foreign institutional investors across financial and non-financial sectors.

ESX was established in October 2023 through a pioneering public-private partnership with the Government of Ethiopia through the Ethiopian Investment Holdings (EIH), its strategic investment arm, as the founding shareholder, with a mandated total public shareholding of up to 25%, with the remaining 75% to be private shareholding.

At present, the list of investors includes foreign strategic investors, including FSD Africa, the Trade and Development Bank Group (TDB), Nigerian Exchange Group (NGX), along with 16 domestic private commercial banks, 12 private insurance companies, as well as 17 other private domestic investors. Public sector interests, jointly representing 25% of shareholding, include EIH and its subsidiaries such as Ethiotelecom and the Commercial Bank of Ethiopia, among others.

The overwhelming interest as investors rallied around the Exchange, up to the close of the capital raise period, signals the enthusiasm and confidence that the ESX heralds a major milestone in the country’s journey towards financial sector development and economic transformation. By facilitating the mobilisation of capital, enhancing transparency, and promoting corporate governance standards, ESX aims to unlock new avenues for investment, spur entrepreneurship, and catalyse sustainable development across various sectors of the economy.

“We are thrilled to have exceeded all our expectations in terms of the capital raise and are excited by the overwhelming confidence shown by investors in the long-term prospects of both ESX and Ethiopia’s capital markets more broadly,” said Tilahun Esmael Kassahun (Ph.D), CEO of the ESX, adding that “strategic foreign investments by TDB, FSD Africa, and NGX Group are particularly important in allowing the transfer of technical knowhow and best practices as well as other areas of long-term strategic value that we will explore.”

ESX also announced today other progress, including the release of its draft Exchange Rulebook for public consultation, the completion of the technical evaluation for the selection of its technology provider, a major milestone to operationalising the Exchange’s trading, and issuer and investor education plans in the coming months leading up the launch of this exciting development for the Ethiopian economy.

Nairobi Climate Network announces the launch of the Carbon Markets Association of Kenya

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The Nairobi Climate Network (NCN), a thriving community of professionals propelling climate action in Kenya, is pleased to announce the upcoming launch of the Carbon Markets Association of Kenya (CAMAK) at a networking reception during the Kenya Carbon Markets Conference 2024.

This networking launch event is co-hosted by the Climate Impact Partners and supported by FSD Africa and Bowmans Law. It will bring together government officials, private sector leaders, financial institutions, and carbon markets experts to mark the establishment of this groundbreaking association. The partners congratulate the Kenyan government on the progress made to the forthcoming regulations and look forward to seeing Kenya leverage the potential of carbon markets for the benefit of its population and the planet.

The Carbon Markets Association of Kenya, incubated by the Nairobi Climate Network (NCN), represents a pivotal step in Kenya’s journey towards building a collaborative and enabling environment for high-quality and inclusive carbon projects. CAMAK’s vision is for Kenya to lead the world in generating high-quality carbon credits that bring tangible benefits to communities and the planet. Its mission is to unite carbon market practitioners and stakeholders, providing a collective voice for the industry in Kenya, while upholding the values of integrity, collaboration, and innovation.

CAMAK’s initial activities will focus on representing industry players, advocating for carbon market developments, and facilitating the sharing of best practices within the sector. Membership requirements include being registered in Kenya and actively engaging in project development or contributing to carbon market finance, research, or advisory. Fees will consist of an admission fee and an annual membership fee, with discounted rates for small-scale developers. During its setup phase, CAMAK will be incubated within the Nairobi Climate Network (NCN) with an interim governing council, which includes prominent industry figures such as Mahlon Walo, Bryan Adkins, Héloïse Zimmermann, Tarn Breedveld, Olivia Adhiambo, Molly Brown, and Charles Waweru.

“We congratulate the Kenyan government on the progress made in carbon market regulations and are proud to have played a role in supporting these developments. We are delighted to transform our carbon markets working group into a formal industry association for the advancement of carbon markets in Kenya.” Héloïse Zimmermann, Co-Founder, Nairobi Climate Network

“The launch of CAMAK demonstrates another significant step towards harnessing the potential of carbon markets for Kenya, and strengthening Kenya’s pathway to climate-positive growth. We look forward to engaging with the Association to continue the dialogue with industry players and ensure the development of high quality, inclusive carbon projects for Kenya.” Ali Mohammed, Special Envoy for Climate Change, Executive Office of the President of Kenya

“As developers of high-quality carbon projects, Climate Impact Partners is proud to support the establishment of CAMAK. This initiative reflects our shared commitment to advancing carbon markets in Kenya whilst unlocking new opportunities for sustainable development.” Faith Temba, Sourcing Manager, Climate Impact Partners

“Kenya has made impressive progress with its revised carbon markets regulations and is now in a strong position to leverage the potential of carbon markets for the benefit of its population and the planet. By bringing together industry players and stakeholders, CAMAK will play a crucial role in advancing carbon markets and climate finance, helping to accelerate climate action in Kenya” Mark Napier, CEO, FSD Africa

“Bowmans Law is pleased to see proactive engagement by the Kenyan government on the recent legislative developments, that will enable Kenya to realise the opportunities from carbon markets. We are proud to support the launch of CAMAK and see collective action from industry players helping to create a more enabling environment for carbon projects and leading to direct benefits for communities in Kenya.” Christina Nduba-Banja, Partner, Bowmans Law

Tanga UWASA issues East Africa’s first ever Water Green Bond

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Embargoes until 22nd February 2024, afternoon.

 Tanga

Today, the first ever Sub-national Water Infrastructure Green Bond in East Africa, worth TZS 53.12 billion has been issued by Tanga Urban Water Supply and Sanitation Authority (Tanga UWASA), an autonomous water utility. This landmark transaction would fund the expansion and improvement of sustainable water supply infrastructure and environmental conservation within Tanga city and nearby townships. The 10-yrs project revenue bond to be listed at Dar es Salaam Stock Exchange (DSE), offers an attractive interest rate of 13.5% per annum to be paid semiannually.

The government of Tanzania adopted the Alternative Project Financing (APF) strategy in 2021 because of the need to broaden its domestic revenue base to finance various national development initiatives including water, energy, heath care, agriculture, and other productive infrastructure projects. Tanga bond is the first significant transaction to demonstrate that the existing regulations and frameworks can be used by municipalities, cities, and sub-national entities to raise significant capital from domestic capital markets in local currency to finance development. Innovative financing such as this one can help to bridge the gap between what is available and what the government, need to reach national development plans and sustainable development goals”.

In his speech while gracing the launching ceremony, the guest of honor H.E. Philip Mpango, Vice president of United Republic of Tanzania said that financing of strategic revenue generating projects through a revenue bond such as the Tanga Bond will reduce pressure on government budget and provide an opportunity to focus on priority social initiatives that can’t be financed via commercial windows. On that front, he said , “Am directing the Treasury Registrar’s Office which supervises public institutions and the Minister of State, President Office, Regional Administration and Local Government (PORALG), to explore eligible public institutions, Local Governments, cities and municipalities to prepare to tap long term finance  via revenue and municipal bond issuance.”

Speaking during the event, the Deputy Minister of Finance Hon. Hamad Chande highlighted that, the Government of Tanzania is committed to ensure that its Alternative Project Financing strategy is used by more public entities to finance local development instead of relying only on government grants, a leaf to be borrowed from the Private Sector and Corporates who operates in the same market.

On his side, Hon. Jumaa Aweso, the Minister for Water insisted that the direction of the 6th administration and the CCM Manifesto is to ensure access to water supply by 95% in urban areas and 85% in rural areas by December 2025. To date, water accessibility has reached 88% and 77% in urban and rural areas respectively. “In order to achieve these targets, it is crucial to deploy various innovative financing mechanisms similar to what Tanga UWASA has done. This project is expected to improve and increase water supply from 96% to 100% in Tanga City and reliability of water for 24 hours, by June 2025. Similarly, increase water supply network from 70% to more than 95% in the townships of Muheza and Pangani respectively by June 2025. Likewise, increase capacity to supply adequate water to Mkinga District through the ongoing project which is under construction”. He added.

On his key remarks, the Head of United Nations Capital Development Fund (UNCDF) in Tanzania Mr. Peter Malika congratulated the government for achieving this historic milestone. He said “UNCDF played an important role of partnering with the government and its key national institutions to influence policies and improve the enabling environment related to domestic capital markets development. Tanga Bond is a demonstration that capital markets are a viable option for financing national development needs without increasing the national debt limits”. UNCDF will continue to provide technical assistance and financial assistance to ensure more sub-national and municipal bond issuances take place to meet the growing demand to fund public services driven by growing populations, urbanization and climate change.

Mr. Nicodemus Mkama, Chief Executive of the Tanzania Capital Market and Securities Authority (CMSA) highlighted that “CMSA has been at the fore in steering development of innovative sustainable capital market products that have facilitated successful issuance of the first gender and multi-currency green bonds in Sub-Saharan Africa; as well as shariah compliant sukuk bonds. These results have positioned Tanzania on the map of global capital markets that offer innovative and sustainable products attracting both domestic and international investors. The Tanga UWASA bond, which is an innovative, sustainable blended capital market product with elements of subnational, water infrastructure, green, revenue bond is a milestone pathfinder transaction, expected to showcase other subnational institutions and municipalities in financing revenue generating projects, through capital markets.”

Other stakeholders involved in preparations of the Tanga water green bond includes NBC Bank (lead transaction advisor), FSD Africa (supported green framework), FIMCO and Global Sovereign Advisory (financial & investment advisory), ALN Tanzania (legal advisor), Innovex (reporting accountant), Vertex International Securities (stockbroker) and ISS Corporate Solutions (second-party opinion provider).

General public, investors, Institutions and individuals are welcome to visit any NBC Bank branches or any other authorized brokers to invest in the Tanga water green bond, within the offer period of 6 weeks.

END

UWASA Tanga issues 53bn/- DSE listed water green bond

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The first ever sub-national water infrastructure green bond in East Africa, valued at 53.12bn/- has been issued by Tanga Urban Water Supply and Sanitation Authority (Tanga UWASA), an autonomous water utility.

The transaction is expected to finance expansion and improvement of the water supply infrastructure and environmental conservation within Tanga city and nearby townships.

The 10 year project revenue bond is to be listed at the Dar es Salaam Stock Exchange (DSE), offering an attractive interest rate of 13.5 percent per annum to be paid semi-annually.

Key stakeholders involved in preparing the water green bond includes NBC Bank as the lead transaction advisor, FSD Africa a UK-backed Africa green financing framework, FIMCO (a financial investment management company that offers professional assistance to clients looking to navigate local financial markets) and Global Sovereign Advisory (GSA), a Rockefeller Foundation linked firm advising governments on strategic, economic and financial issues which took the role of financial and investment advisory, ALN (T) a commercial law firm that acted as legal advisor, Innovex (reporting accountant), Vertex International Securities (stockbroker) and ISS Corporate Solutions (second-party opinion provider).

Water minister Jumaa Aweso said at the event that the general public, investors, institutions and individuals are welcome to visit any NBC Bank branch or authorized brokers to invest in the scheme within the offer period of six weeks.

A key stakeholder, FSD Africa in the past two years obtained a £90m commitment from the British government to initiate a new phase of financial sector development.

It said at the time that the £90m commitment from UK Aid, part of a £320m package, would help initiate an ambitious new phase of financial sector development across the African continent.

The UK Aid package includes funding for eight existing local financial sector development programmes and to set up and scale new FSDs in high-priority markets.

There is also the African Guarantee Fund (AGF), a leader in promoting financing of small and medium-sized enterprises (SMEs) across Africa and FSD Africa, a pioneering development agency committed to reshaping Africa’s long-term financial landscape.

The two signed a strategic cooperation agreement aimed at propelling the growth of Green SMEs by providing critical financial support, technical assistance, and capacity building.

The government adopted the Alternative Project Financing (APF) strategy in 2021 owing to the need to broaden its domestic revenue base to finance various development initiatives including water, energy, healthcare, agriculture, and other productive infrastructure projects.

Vice President Dr Philip Mpango praised the financing of strategic revenue generating projects through a revenue bond such as the Tanga Bond, noting that it will reduce pressure on the government budget and provide an opportunity to focus on priority social initiatives that can’t be financed via commercial windows.

He said that it was vital for the Treasury Registrar to oversee public institutions, including those serving regions, municipalities or cities to explore ways to tap long term finance via corporate revenue or municipal bond issuance.

Hamad Chande, the Finance deputy minister, noted that the bond issuance was part of the government’s Alternative Project Financing strategy which needs to be used by more public entities to finance local development projects.

They should not rely on government grants, in the same manner as the private sector and corporate entities operating in the same market.

Mark Napier, the FSD Africa CEO said the successful launch of the Tanga UWASA Water Green Bond is testimony to the power of innovative financing in driving sustainable development in East Africa.

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Landmark $20.8m Sub-national Water Infrastructure Green Bond Issued in EA

Posted on by TIMOTHYRADIER
  • This project is expected to improve and increase water supply from 96 per cent to 100 per cent in Tanga City.
  • The government of Tanzania adopted the Alternative Project Financing (APF) strategy in 2021
  • Mark Napier, CEO of FSD Africa, commended the collaborative effort behind the Tanga UWASA Green Bond.

The first ever Sub-national Water Infrastructure Green Bond in East Africa, worth $20.8 million, has been issued by Tanga Urban Water Supply and Sanitation Authority (Tanga UWASA), an autonomous water utility.

This landmark transaction would fund the expansion and improvement of sustainable water supply infrastructure and environmental conservation within Tanga City and nearby townships. The 10-year project revenue bond listed at the Dar es Salaam Stock Exchange (DSE) offers an attractive interest rate of 13.5 per cent per annum to be paid semiannually.

The government of Tanzania adopted the Alternative Project Financing (APF) strategy in 2021 because of the need to broaden its domestic revenue base to finance various national development initiatives, including water, energy, health care, agriculture, and other productive infrastructure projects.

The Tanga bond is the first significant transaction demonstrating that municipalities, cities, and sub-national entities can use the existing regulations and frameworks to raise substantial capital from domestic capital markets in local currency to finance development.

Jumaa Aweso, the Minister for Water, emphasized the government’s mandate to improve water accessibility, particularly in urban and rural areas. He stressed the importance of deploying innovative financing mechanisms, similar to the Tanga UWASA initiative, to achieve ambitious water supply targets by December 2025.

” This project is expected to improve and increase water supply from 96 per cent to 100 per cent in Tanga City and reliability of water for 24 hours, by June 2025. Similarly, increase water supply network from 70Per cent to more than 95Per cent in the townships of Muheza and Pangani respectively by June 2025,” said Aweso.

Government officials, including Philip Mpango, Vice President of the United Republic of Tanzania, emphasized the importance of strategic revenue-generating projects like the Tanga Bond in alleviating pressure on the government budget. They underscored the significance of redirecting resources towards priority social initiatives that cannot be adequately financed through commercial means alone.

“Am directing the Treasury Registrar’s Office which supervises public institutions and the Minister of State, President Office, Regional Administration and Local Government (PORALG), to explore eligible public institutions, Local Governments, cities and municipalities to prepare to tap long term finance via revenue and municipal bond issuance,” said Mpango.

Mark Napier, CEO of FSD Africa, commended the collaborative effort behind the Tanga UWASA Green Bond, emphasizing its role in driving sustainable development across East Africa. Napier highlighted the transformative impact of strategic partnerships in reshaping the region’s financial landscape and fostering inclusive growth.

First Water Infrastructure Green Bond

“We are excited to witness the successful launch of the Tanga UWASA Water Green Bond, a testament to the power of innovative financing in driving sustainable development in East Africa. This milestone achievement not only underscores FSD Africa’s commitment to making finance work for Africa but also highlights the immense potential of collaborative efforts in transforming the region’s financial landscape,” said Napier.

“The Tanga UWASA Green Bond represents a significant step towards inclusive growth, and we are proud to have played a role in facilitating this historic initiative. It reinforces our belief in the transformative impact of strategic partnerships and underscores our unwavering commitment to driving positive change for communities across the continent,” he added.

Deputy Minister of Finance, Hon. Hamad Chande, highlighted that the Government of Tanzania is committed to ensuring that more public entities use its Alternative Project Financing strategy to finance local development instead of relying only on government grants, a leaf to be borrowed from the Private Sector and Corporates who operates in the same market.

Other stakeholders involved in preparations of the Tanga water green bond include NBC Bank (lead transaction advisor), FSD Africa (supported green framework), FIMCO and Global Sovereign Advisory (financial & investment advisory), ALN Tanzania (legal advisor), Innovex (reporting accountant), Vertex International Securities (stockbroker) and ISS Corporate Solutions (second-party opinion provider).

The general public, investors, Institutions, and individuals are welcome to visit any NBC Bank branches or any other authorized brokers to invest in the Tanga water green bond within the offer period of 6 weeks.

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African Guarantee Fund partners FSD Africa to boost Green SME Financing

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The African Guarantee Fund (AGF), a leader in promoting financing of Small and Medium-sized Enterprises (SMEs) across Africa and FSD Africa, a pioneering development agency committed to reshaping Africa’s long-term financial landscape, have today signed a strategic Cooperation Agreement aimed at propelling the growth of Green SMEs by providing critical financial support, technical assistance, and capacity building.

The Cooperation Agreement outlines a detailed framework collaboration between the organizations in boosting sustainable development in Africa. The main aspects of this partnership involve assisting in the development of financial products for institutions, offering partial credit guarantees for bonds and funds raised on behalf of SMEs, and conducting capacity-building events.

Furthermore, by providing financial support and fostering business growth, Green SMEs are expected to play a pivotal role in reducing CO2 emissions. This active contribution aligns with the overarching goal of preserving the environment and facilitates access to finance for business growth and empowering SMEs to generate and sustain employment opportunities, especially for youth and women.

Speaking during the agreement signing, Mark Napier, Chief Executive Officer of FSD Africa said: “This partnership represents an important milestone in our efforts to foster sustainable economic development in Africa. By leveraging the strengths of FSD Africa and the African Guarantee Fund, we will actively create a robust ecosystem that empowers Green SMEs. This collaborative effort aims at facilitating access to affordable long-term funds, thereby accelerating the transition towards a greener and more resilient economy.”

Jules Ngankam, AGF Group Chief Executive Officer said: “Fostering a green economic transformation in Africa is one of our key priorities. Through this partnership, AGF will provide financial institutions with bank fundraising guarantees to enable them access affordable funds aimed at facilitating loans to SMEs investing in low carbon and climate resilient businesses”.

Additionally, AGF will extend partial credit guarantees to lenders in a bid to enhance credit accessibility for Green SMEs, empowering them to flourish and make meaningful contributions to environmental conservation.

The two organisations will also provide technical assistance on green financing initiatives, which is critical in building the capacity of key stakeholders such as Governments, Financial Institutions, and Green SMEs.

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Ethiopian Securities Exchange Attracts Foreign Investors

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Ethiopian Securities Exchange (ESX) is attracting both domestic and foreign investors in line with its capital-raising objectives. Siinqee Bank recently became the second equity acquirer after Zemen Bank, with other investors also showing interest.

ESX, established as a share company by the government and private sector, aims to limit government ownership to twenty-five percent but may increase it if private sector interest is insufficient. Key players such as Ethiopian Shipping and Logistics, Ethio Telecom, and others have committed as initial investors. ESX has actively engaged in roadshows and aims to launch the secondary market by year-end. Foreign investors, including FSD Africa, are also involved. Individual investors are welcome, with minimum investment set at Birr 10 million. ESX forecasts substantial revenue growth, aiming to turn a profit by 2028. Anticipated members include financial institutions, brokers, and investors, with EIH overseeing major public firms, including Ethiopian Airlines Group and Commercial Bank of Ethiopia.

Zemen Bank became the first private entity to secure an agreement with ESX by investing Birr 47.5 million to acquire a 5% ownership share. This fulfills the minimum requirement set by ESX for investors as of January 11, 2024. The move is part of ESX’s goal to raise a total of Birr 625 million, with recent support from state-owned enterprises and FSD Africa. More banks and private investors in Ethiopia are expected to follow suit in the coming months.

Foreign and domestic investors can purchase 75% of the shares of ESX while the rest of the ownership goes to the Ethiopian Government through Ethiopian Investment Holdings.

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Gender Bonds Toolkit Unveiled In Nairobi To Centralize Capital For Women

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NAIROBI, Kenya, Feb 19 – A new gender bonds toolkit has been introduced in Nairobi to centralize capital for women in the African capital markets.

FSD Network’s gender collaborative program, British International Investment (BII), and the United Nations Entity for Gender Equality and the Empowerment of Women (UN Women) are the proponents of the program.

The toolkit seeks to equip stakeholders with the necessary insights and strategies to foster inclusive and impactful investments, bridging gender gaps in the investment landscape.

Generally, gender-focused bond issuances have been viewed as complex due to the lack of a ‘go to’ reference on the process and procedure.

However, the toolkit will champion the centralization of efforts to mobilize gender smart capital, strategically addressing technical capacity gaps on both the demand and supply sides.

“With the launch of the gender bonds toolkit, FSD Africa together with our partners are catalysing a seismic shift in African capital markets,” Mark Napier, Chief Executive Officer of FSD Africa, said during the launch.

“This initiative not only signifies our commitment to gender equality but serves as a powerful tool to mobilize capital, foster sustainable growth, and empower women across the continent,’’ Napier added.

According to a report by UN Women and UNDP in 2022, sustainable bonds aligned with SDG 5, achieving gender equality and empowering all women and girls, were still 1 percent of the $900 billion issued through green, social, sustainability, and sustainability-linked bonds.

The financing gap was even more evident when gender finance was considered as a proportion of total global assets under management (AUM), making up not even 0.01 percent.

However, as of June 2023, global Assets Under Management for Use of Proceeds bonds dedicated to gender equality and women’s empowerment reached $13.5 billion, underscoring the increasing significance of gender-focused investments.

“As a founding member of the 2X Challenge and a leader in providing gender finance, BII is committed to empowering women’s economic development,” Jo Fry, Investment Director, and Head of Intermediated Financial Services at BII, said.

“This means that we’re constantly looking for new ways in which we can mobilise more capital and better support women,” Fry stated.

“Our goal in producing this guide is to demonstrate and create better understanding of how effective gender impact bonds can be as an investment tool to advance gender equality in Africa.”

Parallelle Finance, an investment research and consulting firm, served as the author of the toolkit.

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ESX equity proves lucrative as authorities prepare for late 2024 launch

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Authorities working to establish the country’s maiden stock exchange inch closer to raising one billion birr in initial capital as domestic firms rush to acquire stakes in the Ethiopian Securities Exchange (ESX).

The management of ESX has managed to raise 90 percent of the targeted capital from banks, state-owned enterprises (SOEs), and other businesses operating in Ethiopia.

This week saw Siinqee Bank, one of the industry’s newer entrants, announce a 50-million-birr equity investment in ESX, granting the former microfinance institution a five percent stake in the Exchange.

It is the second financial institution to make the leap, following Zemen Bank’s announcement of a 47.5-million-birr investment in ESX last month.

In October 2023, the Ethiopian Investment Holdings (EIH) and four SOEs under its wing made public the acquisition of a 25 percent stake in ESX. The SOEs include Ethio telecom, the Ethiopian Shipping and Logistics Services Enterprise (ESLSE), the Ethiopian Insurance Corporation (EIC), and Berhanena Selam Printing Enterprise.

YoditKassa, chief business development officer at ESX, says raising the targeted 75 percent of capital from the private sector has been relatively straightforward.

“I think we’ll be oversubscribed,” Yodit told The Reporter.

Her team wants to see the remaining 10 percent of initial capital raised before the deadline on March 29, 2024.

No foreign businesses or entities have thus far invested in ESX equity, barring Financial Sector Deepening (FSD) Africa, which has been playing a leading role in the formation of the stock exchange. FSD’s support will be repaid with a stake in ESX.

“FSD Africa’s stake is yet to be converted,” she said.

Yodit disclosed there has been increased interest from foreign companies eyeing a piece of the Exchange. However, there are questions that will have to be addressed, according to her.

“They are typical questions that any foreign investor would ask: like foreign currency repatriation. We are working with EIH on that,” Yodit told The Reporter.

The Exchange has yet to disclose a full list of its equity holders. The names on the list so far are the two commercial banks, five government-owned entities, and FSD Africa.

“We have a non-disclosure agreement when we sign contracts with the companies, so we can’t identify them. But we’ve finalized subscriptions of about 90 percent,” said Yodit. “We will disclose who all of our shareholders are after the allotment.”

Shareholders have to pay at least half the subscribed equity up front.

Heads of the Exchange are eyeing October 2024 for the ESX debut. This leaves a little over seven months to finalize procedures such as license acquisition, gathering public consensus on ESX rules, and the establishment of the Central Securities Depository (CSD) by the central bank, as well as the launch of the trading platform.

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New Kenya Bond Exchange Sees Opportunity in Budding Debt Market

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  • Exchange to complete its capital raising in the first quarter
  • EABX will compete with existing Nairobi Securities Exchange

The new East African Bond Exchange, a would-be competitor for the Nairobi Securities Exchange, sees the prospect for exponential growth in Kenya’s bond market as it prepares to start operating in the first half of this year.

While Kenya has the third-biggest economy in sub-Saharan Africa, the value of corporate debt issued is barely 0.2% of its gross domestic product, compared with an average of 20% to 30% Of GDP in Asian nations, according to Terrence Adembesa, chief executive officer of EABX.

Meanwhile, he said the potential for trading the government’s domestic debt is three to four times the 5 trillion shillings ($31 billion) of outstanding liabilities, instead of just the 600 billion shillings traded in 2023.

“For an economy of our size, the debt market should be much deeper than it is and much more developed,” Adembesa said in an interview. “What you expect to see is enhanced liquidity, enhanced transparency and the provision of transparent pricing.”

Kenya sold $14.9 billion worth of bonds in 2023, compared with $14.6 billion a year earlier, according to Bloomberg calculations using official data. There were eight outstanding corporate bond issuers at the end of September, with a total outstanding amount of 28.4 billion shillings, according to data from the markets regulator.

EABX intends to enable issuers to better price their securities, while investors are expected “to have much more visibility around pricing,” Adembesa said. “You also expect to see a cost saving in terms of trading fees and issuing costs.”

Capital Raise

The exchange, which received its operating license earlier this month, also plans to complete its capital raising in the first quarter of this year. The company received bids totaling about 2.6 billion shillings, above its target of 2 billion shillings, Adembesa said.

About 52% of exchange is owned by the Kenya Bankers Association an UK-backed development agency FSD Africa, he said.

“From a system perspective, we are now doing the testing,” Adembesa said. “We are able to see some trades occurring.”

EABX traces its roots back to 2009, when the Bond Market Association, a lobby group for fund managers, stockbrokers, investment bankers and lenders, decided to establish a self-regulatory organization for the fixed-income market.

EABX will ultimately enable trading of fixed-income securities in almost all of the East African Community member nations. Apart from Kenya, these comprise Tanzania, Uganda, Rwanda, Burundi, Democratic Republic of Congo, South Sudan and Somalia.

— With assistance from Bella Genga

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