Kenya is trying to turn the page after it elected the controversial Uhuru Kenyatta as president.
The country was teetering on the edge of unrest during and after the elections, but pulled back from repeating the violence that ensued following previous elections.
Although former prime minister Raila Odinga challenged the election results in court, he eventually accepted the Supreme Court's decision, as Kenyan leaders showed tremendous restraint and maturity by not bringing the country to its knees with a civil war.
Kenyatta, and his deputy William Ruto, of course, have been charged by The International Criminal Court for their disruptive role in the previous elections.
While Kenyans face the indignity of seeing their elected leaders being charged for crimes by an international court, they also have some pressing domestic issues to contend with.
"A number of vital, more overarching reforms addressing systemic and structural conflict drivers - a culture of impunity, high unemployment, land reform, resettlement of internally displaced persons (IDPs), ethnic tensions, weak institutions and regional and socio-economic inequality - have yet to be implemented," notes the International Crisis Group. "Accountability for the 2007-2008 post-election violence remains largely unaddressed."
To address some of the issues, Kenya is focusing on its Vision 2030 program, aimed at upgrading Kenya to the status of a middle-income industrialized nation, with growth rate of 10% each year till 2030.
Some of the key projects include deepening capital markets, developing special economic zones, tourism programs and resort cities, and the Dongo Kundu Freeport.
But the country considers the Capital Market Master Plan as a flagship Vision 2030 project, aimed at turning the country into an international financial center, similar to the Dubai International Financial Centre.
FSI REMAINS ATTRACTIVE
While the Vision 2030 program had been overshadowed by political developments over the past six months, international interest in the Nairobi International Financial Centre (NIFC) initiative is slowly gaining momentum.
TheCityUK, a UK association that has close ties with Britain's powerful financial services industry (FSI), is helping Kenya develop a strategy to boost its credentials and meet the needs of the rising African continent.
TheCityUK signed a memorandum of understanding with the Capital Markets Authority of Kenya last year and is planning an event in the summer in London to generate interest in the NIFC. "Kenya has one of the largest financial services sectors in Africa contributing over 5% to national GDP," TheCityUK said at the time.
"The agreement will serve to develop a long-term and strategic link for UK financial and professional services, in a market that is expected to grow as services are extended to support the country's economic development. TheCityUK and the Capital Markets Authority share the common goals of ensuring the Kenyan financial services sector continues to be well regulated, transparent and competitive in a global market."
Kenya's early adoption in mobile banking has also earned it praise as a possible technological and financial hub of the future by some influential players.
Earlier this year Google co-founder Eric Schmidt spoke glowingly about Nairobi.
"Nairobi has emerged as a serious tech hub and may become the African leader," Schmidt said after a visit to Africa earlier this year. "A combination of relatively stable politics, the British legal system and a benign climate seem to attract a significant share of foreign investment."
Last year, Kenya's mobile network held more deposits than the country's largest banks, just a short few years after the M-Pesa mobile banking system was launched in the country.
"While the telecom revolution is not unique to Kenya, mobile money is," said the World Bank. "There are approximately 60 million mobile money users in the world, which means that almost one in three is a Kenyan. Half of all mobile money transactions are taking place in Kenya where annual transfers are now around USD 10 billion."
FINANCIAL SERVICES FRAMEWORK
The Kenyan Capital Markets Authority notes that it has already ticked off a number of projects, such as:
- Bond market reforms - Automation of bond trading and maturity lengthened to 30 years.
- Law amended to allow OTC trading for government bonds and operational framework has been developed.
- Demutualization of the Nairobi Stock Exchange completed.
- The Growth Enterprise Segment (GEMS) has been launched.
- The Real Estate Investment Trust (REIT) regulations have been approved.
- The Capital Markets master plan steering committee launched to strategize and develop a 10-year master plan for the capital markets in the country and, by extension, the region.
Improved expectations and supportive policies have made Kenyan capital markets increasingly attractive to foreign investors, said the International Monetary Fund in an April report.
"Foreign investors [have] increased their participation in the stock exchange, accounting for 50% of outstanding holdings and 70% of inflows in recent months, supporting a bullish market."
"New opportunities will arise from the listing of medium-sized enterprises under simplified provisions for the GEMS, the planned introduction of (REIT), and the finalization of the demutualization process for which the Nairobi Securities Exchange (NSE) has already formally applied."
AIMING TO BE AFRICA'S HUB
But being a financial services center rivaling Johannesburg, Lagos and Cairo in the continent will require more than changes in the legal framework.
"Despite recent improvements in investment growth, Kenya has one of the lowest investment rates among comparator countries," said Daniel Kamande, an advisory manager at Ernst & Young, East African region. "The key challenges to improving the investment climate include insecurity, corruption, poor infrastructure (including roads and energy/electricity), and limited access to credit by small and medium enterprises."
Even within East Africa, Kenya ranked as the third most desirable destination for conducting business, trailing behind Rwanda and Uganda, according to the latest Doing Business report from the World Bank.
The country has to tick a number of boxes to reach the status of a viable financial center in Africa, but it may well have a real shot at achieving the goal.
© alifarabia.com 2013
