Family businesses in Kenya are being urged to consider listing on the Nairobi Securities Exchange (NSE) to ensure their long-term sustainability and to preserve the legacy of their founders. NSE Chief Executive Officer Frank Mwiti emphasized that public listing facilitates the introduction of new leadership and ownership structures, which can help businesses outlive their original proprietors.
According to Mwiti, family businesses often face challenges in continuity, especially in leadership succession. By becoming publicly traded entities, these businesses can secure their future and avoid the pitfalls of family conflicts or poor succession planning.
“Listing on the NSE enables businesses to outlive their founders by facilitating the introduction of new leadership, ownership, and supporting organizational structures,” Mwiti stated at a recent networking dinner hosted by Shri Krishana Overseas Ltd (SKL), a packaging solutions provider.
Mwiti highlighted that listing offers family businesses alternative avenues to raise much-needed capital beyond traditional bank loans. “There are other instruments that family businesses can use, such as commercial papers and corporate bonds, which can act as alternatives to bank loans,” he noted.
One of the key advantages of listing is access to diverse capital sources. Publicly traded companies can raise funds through equity financing rather than relying solely on bank loans, which often come with stringent conditions and high interest rates. This model provides businesses with the financial muscle to expand operations, invest in new technologies, and create employment opportunities.
He also pointed out that going public allows business owners to unlock the value of their shareholding, especially during favorable market conditions.
SKL announced its intention to list by introduction on the NSE’s Small and Medium Enterprises (SME) Market Segment in July 2024, pending approval from the Capital Markets Authority (CMA). If successful, SKL will become the first packaging solutions company to be listed on the NSE and the exchange’s first new listing since 2020.
“Listing on the NSE’s SME Market Segment is a strategic decision that will provide Shri Krishana Overseas with access to the capital markets, enabling us to raise funds and accelerate our expansion plans in the near future,” said Sonvir Singh, SKL’s Managing Director and Founder.
The move comes as family businesses in Kenya face challenges related to succession planning and capital constraints. Listing on the NSE can provide these enterprises with the necessary resources and governance structures to navigate these challenges effectively.
In recent years, the NSE has been advocating for more family-owned businesses to consider public listing as a means to enhance transparency, improve corporate governance, and access a broader pool of capital. This strategy is seen as pivotal in driving economic growth and fostering a more inclusive financial market in Kenya.
Beyond individual companies, the move to list family businesses has broader economic implications. A thriving stock market bolsters investor confidence, attracts foreign investments, and positions Kenya as a robust financial hub in the region.
The NSE offers various market segments tailored to accommodate businesses of different sizes and growth stages, including the Main Investment Market Segment (MIMS), the Alternative Investment Market Segment (AIMS), and the Growth Enterprise Market Segment (GEMS). These platforms provide flexible listing requirements to encourage a diverse range of companies to participate in the capital markets.
The NSE has also implemented initiatives to support potential issuers, such as capacity-building programs and advisory services, to guide companies through the listing process. These efforts aim to demystify the public offering process and address common concerns that may deter family businesses from going public.
As Kenya’s economy continues to grow, the role of family-owned businesses remains significant. By embracing public listing, these enterprises can not only secure their legacy but also contribute to the broader economic development of the country.
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